Lies, damned lies and claims of falling charges
Sunday 12 January 1997
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.
- 1 Autistic teenager beaten up by bullies makes them watch 20-minute video about autism
- 2 Nick Kyrgios calls former Olympian Dawn Fraser a 'blatant racist' after she tells Wimbledon star to 'go back where their parents came from'
- 3 Chris Moyles reportedly set to make radio comeback with new breakfast show on XFM
- 4 The Greece debt crisis explained in less than 100 words
- 5 Cristiano Ronaldo storms out of interview after being asked about possible sale of Manchester United target Sergio Ramos
Florida man sentenced to two-and-a-half years for having sex on the beach in front of a child
Autistic teenager beaten up by bullies makes them watch 20-minute video about autism
Eiji Tsuburaya: Godzilla co-creator honoured in today's interactive Google Doodle
Bakery sends 'horrific' version of Frozen-themed birthday cake to unsuspecting customer
Florida teacher sentenced to 22 years in prison for sexually abusing three pupils
More Britons believe that multiculturalism makes the country worse - not better, says poll
Osborne to cap family benefits at £23,000 – announced ahead of his post-election Budget
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
Sickness and disability benefits could be reduced by £30 a week as part of £12bn welfare cuts
iJobs Money & Business
£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...
competitive: SThree: Are you passionate about sales?Do you have a keen interes...
£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...