I recently had cause to research a £400,000 level term insurance case. As I was doing some pension work for the same client, I took the opportunity to compare the basic level term policy against its pension term equivalent.
My client is a healthy, non-smoking 35-year-old male who is a higher-rate taxpayer. I found the results of my research most disturbing.
The most expensive provider of the pension term cover to age 65 (30-year term) was Standard Life who quoted a monthly premium of £184, not including waiver of premium.
It was therefore very interesting to discover that the cheapest provider of exactly the same policy on normal level term rates was Standard Life, with a monthly premium including waiver of £53.64.
Considering the so-called price war in the current protection marketplace, I find it amazing that companies are not taking the opportunity to reprice their pension term as – worst-case scenario – my client could have paid an extra £130.36 per month for exactly the same cover.
My problem is not solely with Standard Life – it is directed at all providers who offer inferior pension term rates, as there were comparatively large differences between all providers' premiums.
A broker consultant from another company informed me that it has not repriced their pension rates for three years.
In light of stakeholder and the pressure its pricing structure will bring to bear on providers' future profit margins, I wonder how many people who intend to transact pension business directly with companies over the internet or via call centres are lured by the prospect of tax relief on protection premiums when they would be substantially better off even after such tax relief with a basic level term?
Long live independent financial advice.
Partner,Best Advice Financial Planning, Sutton, Surrey