Personal Finance: Millions of people are stuck with pensions taken out when companies charged whatever they wanted
Saturday 10 October 1998
Over the years it has provided an invaluable service by publishing, time and time again, performance figures for the scores of companies supplying a wide range of financial products.
This month's issue does sterling work on the personal pensions front. Its findings make frightening reading: if you invested a single premium of pounds 10,000 in a pension fund which grew at 9 per cent a year, after 15 years, the fund would grow to pounds 36,425 if there were no charges levied on it. Obviously, that is completely unreasonable: all fund managers and providers and salespeople must make a living somehow. So it is easy to see, for example, why Equitable Life might want to take pounds 3,303 in total charges over that period, or Norwich Union could levy a fee of pounds 4,527.
But how on earth can Nationwide Life justify grabbing pounds 7,812 out of that same amount, or Eagle Star taking pounds 8,131, or Skandia Life charging a whopping pounds 9,849?
The same picture applies to regular premium pensions, where over the same period, monthly contributions of pounds 200 would build up a plan worth pounds 73,856 without charges. Winterthur Life makes do with pounds 5,341 in charges and Equitable Life with a couple of hundred quid more. But United Friendly clearly believes it needs to take away pounds 18,000-odd of its policyholders' cash, while Sun Life of Canada's salespeople can't survive unless they grab almost pounds 14,500.
Some companies will argue that they have acted to bring down their charges in the past few years. That is true, a fact which Money Management recognises - among a few companies at least.
For example, Eagle Star, the high-charging provider named earlier, has brought out a highly competitive and flexible pension. But that still leaves millions of policyholders stuck with contracts devised five or 10 years ago, when life insurers felt they could get away with charging almost anything they wanted - and did.
Moreover, until 1995 it was virtually impossible for would-be customers to tell what they were being charged, because life insurers were only required to provide details of the average for the whole of the industry.
So I have a proposal to make. It strikes me that if a person signs a contract with a company where the charges are not explained, or are done in a totally impenetrable way, that's an unfair contract.
Why doesn't the Office of Fair Trading investigate those companies and their contracts under the Unfair Terms in Consumer Contract Regulations? It could require companies in breach of these regulations to place all their policyholders on a fair contract, perhaps even backdate compensation.
The OFT is a very busy organisation, so perhaps it ought to pass on its powers in this area to the newly-formed Financial Service Authority, the financial watchdog. Then the fun would really start.
Diving in at the deep end is no excuse for shirking the style stakes
- 1 Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
- 2 Loom bands: Bids for dress made from colourful rubber reach almost £154,000 on eBay
- 3 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 4 Why I'm on the brink of burning my Israeli passport
- 5 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square