Your money: The salesmen who persist in selling the wrong policy

A few weeks ago, I wrote in this column about how many insurance companies levy huge charges on the policies they sell us. The picture is made worse, I argued, because many of us stop paying into our pensions or endowments.

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.