Standard Life improves policy surrender values

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The Independent Online
Standard Life, one of Britain's biggest life insurers, is planning to improve the surrender values for all new policyholders after the beginning of next year, writes Caroline Merrell.

Under normal circumstances people who cash in life insurance or pension policies early will only get a small portion of their investment back because a substantial part of the policy's expenses - including advisers' commission - are taken out in the first years of the policy's life.

Standard Life has decided to break this link between expenses and commission and the charges it makes to policyholders.

It will instead finance these initial costs itself and recoup them over the entire term of the policy.

Standard said the increased benefit for the consumer would not cost the company a lot of money because the vast majority of policies were not surrendered.

John Hylands, general manager marketing, said: 'The number of people who surrender their policies is in the low single figures in terms of percentage.

The increases in surrender value mean, for example, that someone who cashes in an endowment policy costing pounds 82.36 a month at the end of the first year will get back pounds 898 of the total of pounds 988.32 paid in premiums -previously they would have received only pounds 450.

Someone who cashes in a personal pension at the end of the first year will now get back pounds 1,091 on a total premium paid of pounds 1,200 - previously they would have got pounds 777.

The move by Standard Life comes just ahead of new rules to be implemented in January which will force all life insurance companies to disclose to their clients exactly how much they will get back if they cash in their policies early. The new rules will also make them tell customers how much commission a salesman is earning.

In a recent survey on with- profits policies Standard Life was ranked second out of 28 companies for surrender values after five years on a 25-year policy.

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