For immediate release Wednesday 29 July 1998

DOUBLE TROUBLE FACING GOVERNMENT PLANS ON CATMARKING

The Government is heading for trouble for very little benefit by introducing CAT standards on equity products, according to recent research carried out by the Association of Unit Trusts and Investment Funds (AUTIF) as part of its monthly Financial Awareness and Consumer Education Tracking Study (FACETS).

Only 8% of those questioned in this independent survey (52 of a sample of 679) stated that they would feel more inclined to save as a result of the proposed CAT marking scheme. Over a third (34%) indicated that they would see the CAT mark as a Government endorsement of the product.

Anne McMeehan, Director of Communications at AUTIF observed:

"For many people a Government CAT mark means a Government guarantee. More than a quarter of those questioned in this survey (28%), said they would feel let down by Government if their savings in products carrying the CAT mark went down in value and a third of the sample saw a CAT mark as Government endorsement."

She continued:

"Any Government proposing the introduction of a quality standard has to think hard about the risks attached. A CAT mark for a deposit-based product makes total sense. But a CAT mark for any product linked to the stock market, no matter how superior the possible returns over the long term, could in the short term easily deliver a nasty surprise, both to savers and the Government, if markets should suffer a setback."

For further comment please contact:

Philip Warland, Director General, AUTIF, 0171 831 0898
Anne McMeehan, Director of Communications, AUTIF, 0171 831 0898
Susie Poote, Communications Assistant, AUTIF, 0171 831 0898

Notes to editors:

1. The additional question for the July FACETS research was:

The last Government introduced PEPs and TESSAs which this Government proposes to replace with ISAs. This Government is considering introducing a benchmark to operate alongside some of these new products, a CAT mark, in which the costs, accessibility and terms of the product would have to meet Government requirements. In this respect which, if any, of the following statements would you agree with?

a) I would see this as a Government endorsement of the  product

b) I would feel let down by the Government if my savings in such a product went down in value

c) I would still be prepared to put money in to a similar product that did not have the proposed CAT mark

d) A CAT mark makes me feel more inclined to save

e) I do not agree with any of these statements

2. FACETS is a cross-population study based on independent data collected by RSL, one of the largest operations working in this area and a leading exponent of computer assisted personal interviewing. This data is then compiled into a practical format for subsequent interrogation across a wide range of socio-demographic splits using MarketMinder. For further details contact Mike Hare - MarketMinder - Tel: 01778 345588

3. Each month a sample of 1000 people is filtered to isolate those responsible for making financial decisions. It is rigorously selected to reflect the balance of the adult population by sex, age, socio-economic group and geographical location. People are interviewed on a face to face basis to ascertain their understanding of basic personal finance matters that are likely to affect them.

4. There are 14 questions asked each month covering a wide range of personal financial topics. They are the same questions and will not change unless circumstances specifically demand it, in which case they will be replaced by a question of similar weight and where a lack of understanding or appreciation will have similar implications for people's financial security. As this is an ongoing survey these are 'live' questions and therefore their precise nature and phraseology is not open to general disclosure, although members of the press may see them on request for their own appreciation and strictly not for publication for fear of interfering with the research.

5. The questions are asked to establish a True, False, Don't know response, thereby establishing a number of measurement tools. The main AUTIF FACETS index is based on knowledge, i.e. those questions that are correctly answered. In addition AUTIF is in a position to measure the level of misunderstanding, i.e. where the answer given is wrong, the level of ignorance where the answer is 'don't know' and if the last two elements are combined to form a composite, the understanding 'gap' can be monitored. Furthermore, this can be carried through to assess understanding on an individual question basis and to measure any improvement that can be isolated to specific segments of the population.

6. It is not anticipated that there will be much volatility in these indices and a three month rolling measurement is being used so as to ensure the sample has maximum relevance. What is sought is the translation of a positive trend over time in the level of understanding by the population at large.