Personal Finance: When supermarkets start selling pensions, it tells us a lot about banks and branding

FORM APPEARS to be triumphing over substance in the battle to win the consumer's savings and investment pound. In other words, it is not the substance of, for instance, the pension that the customer is buying which drives the transaction but the form of the organisation from which the customer is buying it.

The key question now is not what sort of pension do I need, but do I trust the salesman?

This week saw the launch of Tesco's latest offering of what might be termed its steakholder pension. You pop into the supermarket for the weekly shop: a pound of potatoes, a packet of peas and a personal pension.

It is not quite as simple as that. While you can buy some products off the retailer's shelf, the Tesco pension rightly requires a more considered approach. Fear not. There will be no exasperated lines of shoppers at the checkout while staff assess whether you want a balanced or international growth portfolio. The function of the stores is to act purely as a marketing outlet. You may find that a pensions leaflet is thrust into your trolley but any further development of the transaction will be carried out at your discretion from the comfort of your own home.

If you decide to call the Tesco Pensions Adviceline you will be treated to a conversation with "highly trained professionals who really know what they are talking about".

The Tesco steakholder pension may or may not be right for you, it may or may not be a good deal. The point here is that because so many customers have come to trust the Tesco brand, they will feel comfortable with the advice they receive on perhaps their single most important savings and investment product. This is not because Tesco, in partnership with Scottish Widows, provides the best pensions but because people trust them. If they give good pork chops, why shouldn't they give good pensions?

Many of the new entrants in the financial services sector are there because they recognise that the integrity of the brand has become crucial in developing a relationship with customers. The success of Virgin, for instance, is largely founded on its brand strength.

This, of course, creates enormous difficulties for the established players in the industry who have not been as diligent as they might in terms of nurturing their brand. Take the high street banks, for instance, who have long harboured the ambition to create bancassurance businesses using their branch networks to distribute life assurance products to their extensive customer base.

An indication of how successful they have been came this week when NatWest confirmed it was spending nearly pounds 11bn to buy Legal & General. This is a pretty expensive way of admitting that the bancassurance dream has proved elusive. To give this some context, the wealth management business currently accounts for 12 per cent of the NatWest group. After integrating Legal & General wealth management will account for 40 per cent of the group, putting it on a par with the traditional banking business. Put another way, NatWest has 16 per cent of the nation's bank accounts but only 1.3 per cent of the pensions market. In essence NatWest is paying billions of pounds to acquire a brand that its customers can trust. If we will not buy a pension from the bank, perhaps we will be more inclined to deal with a mailshot from Legal & General, whose brand is being carefully preserved within the enlarged NatWest Group.

It is a damning indictment of the high street banks that we would rather trust our pension to the purveyor of pork pies than to the protector of our pay cheques. And it is not just pensions. On Tuesday the Daily Mirror offered its readers the opportunity to invest in a savings plan in a four- page advertisement feature fronted by Carol Smillie, who hosts a TV show called Changing Rooms. Personally, I wouldn't let her change a light bulb, but clearly she is regarded as a person who can be trusted not to mess up your living-room and hence not to lend her name to a duff savings product.

Time was when the local bank manager was a pillar of the community who could be relied upon to proffer advice on all matters financial. In many cases he became like a family friend. But as the branch network has been dismantled under pressure to cut costs, so any lingering affection the nation had for the bank has dwindled.

There is good news and bad from this preference for form rather than substance in the savings and investment market. On the positive side a recognition that the creation of a powerful brand to which savings and investment customers are prepared to swear their allegiance can serve only to improve the quality of the financial services sector. A trusted brand cannot be created simply by an extensive marketing and advertising campaign. It must be supported by quality, value and integrity in terms of both products and service.

The downside is that, in the short term, important long-term savings and investment decisions may be taken on the basis of current perceptions rather than sustainable reality. Thirty years ago you may have trusted Cyril Lord (of "carpets you can afford" fame) more than Tesco. The brand that is in vogue when you buy a pension may have fallen from grace when the time comes to reap the benefit of your investment.