Outlook: Leaden Standard

WHAT A shower the companies that make up the long-term savings industry are. Yesterday brought news of another cut in "bonuses" from Standard Life, just the latest of many. "Bonus" is the term life funds use for what is only the investor's just rewards. Like much else about the long- term savings industry, the word bonus is in truth a con, for it implies that you are getting that little bit extra. Actually it is only the rate of return, but like so much else about this industry, it is designed to obfuscate.

As Standard Life pointed out yesterday, even after the latest bonus cuts, the payout on a 25-year endowment involving premiums of pounds 15,000 would still be pounds 51,220. That equates to an annualised return of 8.7 per cent, which is not bad even if you would have done better by simply tracking the stock market. Yet this is 18 per cent less than you would have got had your policy matured a year ago. Indeed, at the present rate of decline in bonuses, it will be less than five years before the annualised rate of return sinks to little more than the rate of inflation.

Those who took out a policy 25 years ago are still doing quite well. Those who took one out more recently will do appallingly on present projections. Once Standard Life floats on the stock market, there won't be even the prospect of a windfall to look forward to.

These days, the big life companies sell very little in the way of conventional with-profits business. With-profits has been too discredited by the sins of past. Instead the industry concentrates on more transparent, easier to understand products such as unit linked bonds. Yet the approach is still essentially commission, rather than customer driven and it may be no guarantee against future mis-selling.

The savings industry remains light years away from being the customer- orientated dynamo it ought to be. Indeed there seems to be a case of almost total market failure here. The only thing that seems guaranteed to make matters even worse are the Sandler proposals for a prescriptive, simplified suite of savings products, as dictated by the Government. You'd do better literally sticking your money under the mattress than investing in one of these.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory