Clarity is the best policy on costs

Personal Finance

"TRANSPARENCY", that most modern of buzz-words, is slowly but steadily making itself felt in the sales of endowment policies and pension plans, thanks to two parallel and welcome developments. Specialist magazines such as Money Marketing and Money Management wade through figures for past performance and present them each year for public scrutiny.

Meanwhile the Government's own measures, slow and imperfect though they have been, are at last drawing attention to the amount of commission which salesmen and agents earn and the charges which fund managers deduct from the premiums they receive before they even start to invest them.

It is a long overdue improvement. Most of the mortgage endowment and pension business in the UK has traditionally gone to a couple of dozen insurance companies which are already big in the business and have the tied agents or sales forces and/or the contacts with independent financial advisers to keep their names on the panel of suppliers. It has been a cosy world in which there has been enough business for everyone, and the saver/investor was kept in a state of blissful ignorance at the charges being taken out of his or her savings.

But the past performance records show that some of the best performances in managing endowment policies in recent years have come from relatively small and little-known companies such as Swiss Pioneer Life, Royal London and Royal National Pension Fund for Nurses.

The biggest suppliers of endowment policies - CIS, Norwich Union and Standard Life - rank in mid-table, while big names such as the Prudential and Eagle Star performed very poorly. Over 25 years RNPFN, Wesleyan Assurance and Tunbridge Wells have outperformed all the big names in the business.

Pension fund performance throws up a different combination of good short- term performers, including Refuge Assurance, Royal London, Medical Sickness and Equitable Life, while the biggest players including CIS, Norwich Union, Pearl and Standard Life were strung out in the middle.

Sifting through the categories to allow for transfer values and early surrender values, single premium as opposed to regular savings, changes the racing order yet again. But there is enough evidence to show that some of the bigger companies cannot afford to go on relying on sheer size and embedded contacts to maintain the flow of new business.

Even more telling is the charging structure, derived from information that companies are now required to provide. Money Marketing calculates that a single premium of pounds 25,000 now growing at 9 per cent compound should make pounds 532,000 in 35 years before charges. But high- charge investors such as Provident Mutual, Prudential, Scottish Provident and Sun Life would cost the investor up to pounds 200,000 more than low-charge companies Royal Life, Scottish Amicable, Scottish Equitable and Scottish Life.

With this kind of publicity repeated every year, high-charge companies will have to cut their charges or retire to niche positions, and independent financial advisers have a duty to clients to see it happens quickly.

Start your day with The Independent, sign up for daily news emails
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own