Your money: The salesmen who persist in selling the wrong policy
Sunday 15 December 1996
This is not usually our fault. Real life - such as divorce or unemployment - has a habit of intruding on assumptions that once a policy is started we will contribute to it for 25 years. As if on cue, further evidence for this argument comes from the financial services regulator, the Personal Investment Authority.
The PIA issued a report last week showing that "persistency" levels - the length of time a policy is kept going - have barely improved between 1993 and 1994, the last period available. On average, 8 per cent of people halt endowment policy payments within one year, rising to almost 14 per cent after two years. Some 15 per cent stop contributions to a pension inside one year, rising to more than 25 per cent after two years.
The picture improves significantly if the product has been bought through an independent financial adviser, who takes more care to tailor it to the needs of his or her clients. Things are worse for policies sold by company representatives.
There are a number of lessons to be learned from this story. The first is that in a straight choice between an independent adviser and a salesman, you should always opt for the independent adviser. The second, more significant, lesson is that despite all their pious talk over the past few years, many companies are still unable to devise the kind of product that reflects the lives we lead.
In consequence, we pay through the nose and our initial instinct to plan financially is thwarted by the very companies we approach.
The PIA says it intends to monitor individual companies' persistency rates to see if they are guilty of mis-selling.
This begs the question of whether even the average quoted above is acceptable. I don't bel-ieve it is. A situation where a quarter of people stop payments into a pension after two years is already a scandal. The fact that there is no improvement on the previous year makes it even worse. It is time for disciplinary action now, not in a year's time.
Much to my amazement, Alliance & Leicester did not take up my suggestion a week or two ago that it should put its flotation plans on ice in its dispute over the Treasury's forthcoming Building Societies Bill. Despite the society's reservations about the part of the Bill which removes protection against predators if a society takes over or merges with another financial institution, Alliance & Leicester plans to demutualise next Spring.
Its plans received plebiscital support. Of those who voted in a postal ballot, 97 per cent backed its proposal. The result followed a sparsely- attended meeting in London.
However, many thousands of building society members find they are not eligible for the free shares promised in these flotations. This time, the issue is the rights of couples who divorce and split their joint accounts.
A reader from Leeds called to say she is in the process of separating from her husband. As is common, she is the second-named person on her Halifax account, even though she has been its principal user for years. Under current rules, she stands to get nothing, unless she can persuade her husband to hand over the free shares which she believes are hers by right.
Building society flotations are likely to bring immediate benefits to many millions of people. But it is worth reminding ourselves that there is a small minority for whom this bonanza will leave no more than a bad taste in the mouth.
Steve Lodge is away.
- 1 Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
- 2 Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
- 3 Arturo Vidal to Manchester United: Midfielder set to force through move to Louis van Gaal's Red Devils - reports
- 4 Disney heiress Abigail disowns her share of family profits in West Bank company
- 5 Israel's propaganda machine is finally starting to misfire
Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Justin Bieber posts Instagram photo of Orlando Bloom crying after Ibiza fight 'over Miranda Kerr'
Disney heiress Abigail disowns her share of family profits in West Bank company
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...