Providers accused of adding to problems

Buying an insurance ISA, or even finding out what one is, can be problematic, as one of our readers found out
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The Independent Online

Insurance ISAs have been almost completely ignored in the rush to buy their two vastly more popular cousins, cash and equity ISAs.

The figures from the Inland Revenue are unarguable: in the six months to last October sales of cash ISAS amounted to £6.4 billion, equity ISAs to £6.22bn and insurance ISAs to just £26million. What are the reasons for this unpopularity?

ISA sellers say the low take-up rate is due to the fact that only £1,000 can be invested in an insurance ISA, compared to a maximum of £3,000 for a cash ISA and £7,000 for an equity ISA.

They also say people do not really know what they are. One cause for confusion is that "insurance ISAs" are actually nothing to do with insurance. They are with-profit funds that are mainly invested in the stock market. With-profit funds give a return nearly as good as direct investment in shares but hold back a portion in good years in order to smooth over stockmarket ups and downs.

There may be another explanation for consumers' lack of enthusiasm, however. Following an article in The Independent in January, one reader tried to buy an insurance ISA. Gordon Whitehead, of Ripon, North Yorkshire, did not find it at all easy and concluded that "My experience suggests the low uptake of insurance mini-ISAs is at least partly due to the poor service of the providers themselves."

Firstly he approached Axa Sun Life over its Wealthbuilder ISA. This is a with-profits fund which invests 59.3 per cent in UK equities and another 20.1 per cent abroad. It is CAT marked and has a 2 per cent annual management charge.

Mr Whitehead takes up the story: "On March 15 I phoned a local rate number and was referred to an independent financial adviser in Bristol. There I was told that the Axa Sun Life Wealthbuilder was not on their preferred list. I explained that Axa Sun Life had referred me to them and was referred back to Axa Sun Life.

"Axa Sun Life then gave me an 0800 number to ring. I asked to be sent information on the Wealthbuilder but was offered a talk with a personal adviser. I explained I was only wanting information to be sent to me. My personal details and daytime phone number were taken. I was then asked if I would be available to take a phone call in 10 minutes time. When I asked why I was told that a personal adviser wanted to "flick through" the literature to see if there were any problems or any questions they needed to ask me. I tried to point out again that I only wanted to be sent information about the product. With some ill grace this was accepted. However nothing had arrived by 20 March. And as for the talk with the personal adviser at Axa Sun Life, I suspect the aim was to sell me a maxi-ISA.''

Axa Sun Life subsequently told The Independent: "Mr Whitehead picked out a number from the phone directory and the request was not correctly recognised by our staff and so he unfortunately went all around the houses. There is a process for people who simply want information and Mr Whitehead should not have been passed to a salesman. But it is not surprising that the odd call goes astray."

Turning to Norwich Union, Mr Whitehead was interested in the Savings ISA, which has a choice of four funds. Most popular is the with-profits fund which is made up of a mixture of equities and fixed-interest investment. The ISA doesn't have a CAT mark, and costs are £2.02 a month plus an annual charge of 0.875 per cent. If you sell the ISA, Norwich Union takes 5 per cent.

Mr Whitehead says: "A call to Norwich Union on an 0800 number brought two lots of information by return of post. One item, from a Norwich address, was the Independent Guide to ISAs. The other, from a London address, was information on the Norwich Union maxi-ISA.

"On 28 February I phoned the number on the covering letter from the London office, but it was out of order. On the same day I phoned the number from the Norwich letter and asked for information on insurance mini-ISAs.

"On 13 March, having received no information following this second request, I tried both numbers again. The London number was still out of order. I made another request to the Norwich number for information on insurance mini-ISAs. A week letter... nothing had arrived."

Norwich Union told us: "Our computer records show Mr Whitehead's calls as being: On 24 February he asked for information on the Independent Guide to ISAs. On 28 February he requested details on insurance ISAs. They should have gone through an automated system that took his details and it should have gone out over night. On 13 March the same thing happened, again the information should have gone out over night."

NU says: "We don't understand why he did not receive the other two packs. We have not received any other complaints about our packs not arriving."

Lastly Mr Whitehead looked at Abbey National's with-profits fund. This invests 51.5 per cent in UK equities and 19.6 per cent overseas. The ISA has no CAT mark and costs are 1.25 per cent a year and 5 per cent when the ISA is sold.

Mr Whitehead says: "I was able to walk in to the local branch of Abbey National and pick up a leaflet on the insurance mini-ISA offered by Abbey National. If I buy an insurance mini-ISA, this is likely to be the one."

Hugo Thorman, a director of Abbey National, says: "It's always great to hear such an endorsement of our product and process. It was clear some time before the launch of ISAs that making them easy for customers both to understand and to buy were our main objectives."

"We do, however, feel that the industry has been very unfair to insurance (With-profits) ISAs. "With-profits funds have been very popular for many years providing both smoothed returns and the benefits of equity investments for large numbers of investors and savers. Now customers can have these benefits together with the tax advantages available in an ISA. The With-profits ISA is the ideal low risk long-term equity based regular savings vehicle."

For information from AXA Sun Life, see www.axaisa.co.uk or call their ISA helpline on 0800 0288123.

To speak to an adviser at Norwich Union or receive a brochure call free on 0345 606 636.

To contact Abbey National call free on 0800 30 20 30.

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