The mechanism of deceit is simple. The rules state that you must give details of your charges over the lifetime of a policy. These are then said to reduce the yield on that policy by a certain percentage each month.
What you do is offer a product where 15 or 20 years into a policy the company gives a little bonus on the amount invested so far. At maturity, the final payout is much larger as a result.
It all sounds marvellous. Except that one thing all insurance companies know from long experience is that most policyholders do not keep their schemes over the full term. Most surrender them early or halt their contributions.
But because the projected charges you are required to give are for the full length of a policy, clever little tricks like this allow you to pretend that what you are selling is cheaper than it really is.
Of course, the companies might like to claim that all they are doing is merely rewarding those who stay with them to the end. Many describe their bonus systems as "loyalty schemes".
Utter rubbish. The reasons for surrendering a policy are almost always perfectly genuine: div-orce, unemployment and other changes in personal circumstances. These have unavoidable consequences for anyone's financial plans.
Even if we were to take these companies at face value, what they are doing is designing and selling products that have no bearing on the reality of people's lives.
If we were a bit nastier, we could argue that what these insurers are doing is cynically manipulating the figures to over-charge people, costing them perhaps thousands of pounds over their lifetimes while boosting company profits.
One might expect that regulators would want to get hard with these cynical manipulators. It would be easy to do so. Aside from a declared setting- up fee, companies should be forced to levy most of their charges in the year in which they are incurred. This is how unit trusts are packaged, and despite concern over the detail of how their charges are disclosed, most people agree they are far less opaque than life firm products.
Of course, some will squeal that their "freedom" to charge in the way they think best is being taken away. To which we might reply that all we are taking away is their right to cheat us.
Sadly, if we are expecting regulators to act, we could be in for a long wait. The Personal Investment Authority is many months behind deadline in its attempts to ensure compensation for hundreds of thousands of victims of the pension transfer scandal, first uncovered in 1993.
In the past few weeks it has failed to publish a report setting out how its members are giving redress to those who were mis-sold a personal pension. Cynics believe this is because so few cases have been resolved that once the figures are released it will face public uproar.
So the solution must lie, for the moment at least, with us. It means talking to experts, doing our homework and asking the right questions. It also means refusing to do business with firms that rip us off. Some of those named in our story say they are "reviewing" their charges. Until their reviews are over, we should avoid them like the plague.
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