Forty per cent of pension policies lapse within four years
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Your support makes all the difference.MORE THAN 40 per cent of pension policies sold by insurance companies lapse within four years, according to a survey released yesterday.
The survey, by the Personal Investment Authority, showed that only 60 per cent of pensions sold by insurance company sales people in 1993 were still receiving payments four years later.
The survey reinforces concerns that customers are being sold policies designed to last for 25 years, only to drop out of the commitment because of changes such as unemployment or divorce. Customers who lapse policies in the early years typically fail to get good value from pension policies. In most policies, up to half of payments made in the first two years are eaten up by hefty upfront charges.
The PIA said the number of policyholders keeping up payments, also known as persistency, was "disturbingly low".
Joe Palmer, chairman of the PIA, said: "The regulators and the industry cannot afford to ignore these results. Persistency is a key measurement of quality of business and the continued slow progress in reducing these levels is unacceptable."
The regulator said it would be taking a tough stance towards firms with the worst lapse records, where policies may have been sold to people unlikely to be able to keep up payments.
"The regulators are actively paying particular attention to the worst performers," Mr Palmer said.
Companies with the worst records on lapsing pension policies include Britannic Assurance, Old Mutual, Reliance Mutual, Royal & Sun Alliance, Albany Life and United Assurance.
The regulator also found a similar problem with endowment policies, many of which are a vital part of repaying a mortgage.
Where they were sold by insurance companies, nearly a quarter of endowment policies with regular premiums had lapsed within four years.
Companies with poor records on lapsing endowment policies include Lincoln, United Assurance, Reliance Mutual, Albany Life, Canada Life and Abbey Life.
The regulators found that policies sold through independent financial advisers, rather than insurance company sales people or estate agents, were more likely to be maintained.
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