The Great Swindle
Tony Hazell in The Daily Mail writes:
"With-profits policies must be the most widespread con ever perpetrated on British investors. Very few people over 30 will have completely avoided having some of their money mismanaged in these massive funds.
But aside from a few mis-selling fines, the insurance companies responsible have got away with this great swindle."
I couldn't agree with him more!
The life assurance companies should set this matter straight and underwrite these useless products that have been badly designed, and massively mismanaged.
They won't of course, because too many people in these companies have made far too much money by way of commissions and bonuses; ie greed, rather than integrity, is the overriding principle at play here.
Showing posts with label management fees. Show all posts
Showing posts with label management fees. Show all posts
Thursday, August 28, 2008
Thursday, March 13, 2008
The Endowment Rip Off
The Endowment Rip Off
Underlying funds held by insurance companies have risen by an average of 6% over the last year. This in theory should be good news for the millions of people holding useless, underperforming with-profits endowment policies.
Unfortunately, as with all endowment policy matters, what at first appears to be an opportunity for the hapless policy holder to earn a respectable return turns out to be an opportunity for the life insurance companies to take "a dip".
The biggest and the "best" of Britain's life insurers have in fact reduced their payouts by 3% last year (remember the funds they "manage" on our behalf have actually risen by 6%).
This cut in payouts has cost the endowment policy holders around £8BN, according to The Times.
The Times quote Tom McPhail, at Hargreaves Lansdown:
"Stock markets have risen substantially since the end of the bear market in 2003, but final payouts keep on falling.
It just doesn't add up."
That's putting it politely!
We would be better off having "invested" our money in a "bog standard" savings account over the last 10 years.
Simple!
Because they can!
Insurers have discretion over how much of the gain they pass on, therefore they choose to keep the money for themselves.
A report for the trade body Actuarial Profession expects payouts to continue to fall by 3% per annum until 2020.
We are being ripped off by the insurance companies, and no one in the regulatory authorities is doing anything about it.
Underlying funds held by insurance companies have risen by an average of 6% over the last year. This in theory should be good news for the millions of people holding useless, underperforming with-profits endowment policies.
Unfortunately, as with all endowment policy matters, what at first appears to be an opportunity for the hapless policy holder to earn a respectable return turns out to be an opportunity for the life insurance companies to take "a dip".
The biggest and the "best" of Britain's life insurers have in fact reduced their payouts by 3% last year (remember the funds they "manage" on our behalf have actually risen by 6%).
This cut in payouts has cost the endowment policy holders around £8BN, according to The Times.
The Times quote Tom McPhail, at Hargreaves Lansdown:
"Stock markets have risen substantially since the end of the bear market in 2003, but final payouts keep on falling.
It just doesn't add up."
That's putting it politely!
We would be better off having "invested" our money in a "bog standard" savings account over the last 10 years.
- A 10 year endowment policy from Friends Provident has returned a mind numbingly small 0.9% a year, compared with 1.6% from a 90 day deposit account.
- Prudential's fund grew by 7.2% last year. However, a typical maturing £50-a-month, 25 year Prudential endowment policy will now pay out £44,515. This represents a 5% cut on the £46,695 paid out on an equivalent plan that matured in 2007.
- A typical 25 year Commercial Union endowment policy will pay out £40,737. This is 7% down on the £43,697 paid out on an equivalent plan last year.
Simple!
Because they can!
Insurers have discretion over how much of the gain they pass on, therefore they choose to keep the money for themselves.
A report for the trade body Actuarial Profession expects payouts to continue to fall by 3% per annum until 2020.
We are being ripped off by the insurance companies, and no one in the regulatory authorities is doing anything about it.
Tuesday, November 27, 2007
Bleak News
Bleak News
Money Management's upcoming December issue survey shows a bleak outlook for those who hold endowment policies.
On average, a 25 year policy 10 years into its term needs to grow 6.9% per annum until the end of its term in order to meet its £50K sum assured.
The average 25 year policy 15 years into its term needs to grow 8.6%, while policies 20 years into their term need to grow an average of 8.2%.
Given the lousy levels of returns on most endowment policies, these required returns are very unlikely to be achieved and endowment holders can expect serious shortfalls when their policies mature.
Congratulations to the fund managers for doing such an "excellent" job of "managing" these policies, yet still being able to pay themselves a very nice management fee each year despite "managing" loss making policies.
Money Management's upcoming December issue survey shows a bleak outlook for those who hold endowment policies.
On average, a 25 year policy 10 years into its term needs to grow 6.9% per annum until the end of its term in order to meet its £50K sum assured.
The average 25 year policy 15 years into its term needs to grow 8.6%, while policies 20 years into their term need to grow an average of 8.2%.
Given the lousy levels of returns on most endowment policies, these required returns are very unlikely to be achieved and endowment holders can expect serious shortfalls when their policies mature.
Congratulations to the fund managers for doing such an "excellent" job of "managing" these policies, yet still being able to pay themselves a very nice management fee each year despite "managing" loss making policies.
Tuesday, November 06, 2007
L&G Increase Their Charges
L&G Increase Their Charges
Recently Legal and General, my endowment provider, wrote to me to inform me that my two endowment policies that I hold with them will most likely make a loss.
Using three projected returns, the 1987 policy (target £35000) will produce the following results:
-4% shortfall £5400
-6% shortfall £2700
-8% surplus £ 300
The 1991 policy (target £39700) will produce the following shortfalls:
-4% shortfall £10200
-6% shortfall £ 7500
-8% surplus £ 4600
I received another letter from them today, informing me of the following:
1 That they have changed the rules to give them the right to use fund managers other than Legal & General Investment Management Ltd, if they believe that it is necessary.
Don't they have confidence in their own management skills?
2 They are increasing the management fees for managing my policies. Seemingly they have compared their fees to other endowment providers, and feel that an increase is necessary!
The good news is that the new fees (after a search on the back of their letter, it seems that the fees are going up by 0.06% of the value of the investment per year) are, in the opinion of L&G, "highly competitive with typical market rates".
So that's alright then!
A couple of questions that have crossed my mind:
1 Why the hell are they raising the fees, when their "management" of my policies has produced losses?
2 Why are they charging more for their "management" services, when they have said that they may in fact use other fund managers?
Given the losses that my funds are projected to "yield", an increase in charges will simply make matters worse.
These endowment providers are very relaxed about changing the rules, when it suits them. Now is the time for them to change the rules to suit the hapless millions who own these useless, badly managed, costly and underperforming products.
Underwrite them!
Recently Legal and General, my endowment provider, wrote to me to inform me that my two endowment policies that I hold with them will most likely make a loss.
Using three projected returns, the 1987 policy (target £35000) will produce the following results:
-4% shortfall £5400
-6% shortfall £2700
-8% surplus £ 300
The 1991 policy (target £39700) will produce the following shortfalls:
-4% shortfall £10200
-6% shortfall £ 7500
-8% surplus £ 4600
I received another letter from them today, informing me of the following:
1 That they have changed the rules to give them the right to use fund managers other than Legal & General Investment Management Ltd, if they believe that it is necessary.
Don't they have confidence in their own management skills?
2 They are increasing the management fees for managing my policies. Seemingly they have compared their fees to other endowment providers, and feel that an increase is necessary!
The good news is that the new fees (after a search on the back of their letter, it seems that the fees are going up by 0.06% of the value of the investment per year) are, in the opinion of L&G, "highly competitive with typical market rates".
So that's alright then!
A couple of questions that have crossed my mind:
1 Why the hell are they raising the fees, when their "management" of my policies has produced losses?
2 Why are they charging more for their "management" services, when they have said that they may in fact use other fund managers?
Given the losses that my funds are projected to "yield", an increase in charges will simply make matters worse.
These endowment providers are very relaxed about changing the rules, when it suits them. Now is the time for them to change the rules to suit the hapless millions who own these useless, badly managed, costly and underperforming products.
Underwrite them!
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