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
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

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss