Lies, damned lies and claims of falling charges

For The past two years, increasingly weary punters have been treated to a charade by the Personal Investment Authority, the financial watchdog. Last week - as in 1996 - the PIA published a survey which showed, or so it claimed, that charges on the most common policies sold to investors had fallen slightly.

The regulator wants us to believe this, because for two years it has been implementing rules forcing companies to disclose the charges they impose on the policies they sell us.

In theory, the new disclosure regime was meant to deliver much greater competition. Savers would be able to compare products and choose the cheapest ones, an option previously denied them. So optimistic were the regulators that there were even predictions of a pounds 1bn bonanza.

The real picture is far more murky. Yes, there has been an overall cut of 3.9 per cent in the charges levied by PIA members, the life companies that sell the products. But this is nothing more than sleight of hand. For a start, a cut of 3.9 per cent is insignificant. If you charge pounds 1,000 on a policy and cut pounds 39 off the bill, punters are hardly going to cheer.

In any case the cut is an average figure. The reality, as the PIA itself has admitted, is that a minority of the most outrageously expensive companies - which did no business because of their high charges - have been dragged, screaming, into the real world.

The vast bulk of companies charge as much as they ever did, which is one heck of a lot. And a minority have pushed their prices up, not down. What's more, the PIA's figures are highly suspect. As this paper has argued, charges can be imposed at any point in the lifetime of a product. You can charge a lot at the start and tail off the fees at the end of a 25-year term.

The average costs will look cheap unless - as is often the case - policyholders stop paying in after a few years and end upbeaing the brunt of the charges.

In other words, millions of people will pay for several years into savings and other policies which will deliver even less when they finally pay out than some of the worst-charging building society accounts.

It is not surprising, therefore, that despite the risks involved in buying products over the telephone, investors are turning to providers such as Virgin and Scottish Widows for pensions and whatever else. Simpler and cheaper products can be an attractive proposition, as even Eagle Star discovered. Traditional companies will discover to their cost that we will have no more of this trickery.

Despite this new openness, however, Eagle Star's press release, which helpfully contained a chart to compare its performance with that of its rivals, left a little to be desired. In one section, it compared itself to Virgin, suggesting that like Richard Branson's company, it charges a pounds 2 monthly fee on the fund. Except that Virgin's fee is only paid when contributions are made. So if you halt payments, there is no monthly fee to be paid, unlike Eagle Star.

Whoops. Perhaps some habits are hard to break.

AT LAST, the Halifax has announced its free share proposals. They include a minimum 200 shares, worth up to pounds 900 for both savers and borrowers. The maximum is almost 1,200 shares on deposits of pounds 50,000 or more, worth up to pounds 5,400, according to the society's best estimates. The voting result is not really in doubt.

Failing that, members should make sure that the amount in their account on 24 February this year equals the level on 25 November 1994. Read the society's weighty, but informative, document now being mailed to all members.

In weeks to come, we will explain in more detail what people can do with with the shares themselves. Meanwhile, if you have any doubt about your eligibility, call 0800 527327.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect