TOXIC DEALS STILL EXIST — SO DITCH THEM ALL TODAY
WHOLE OF LIFE
THESE insurance policies pay a lump sum when you die in return for a monthly premium.
They were often marketed as a way to cover your inheritance taxes, mortgage or a funeral — but there’s a sting in the tail.
Though the plan is guaranteed to remain for your entire life, the insurer retains the right to hike your premiums — or cut the payout at any time. If you don’t pay the increased price, insurers will slash your cover by as much as 75 pc or cancel it altogether.
PENSION LOANS
IGNORE any firm that offers you the chance to borrow money against your pension. To get the loan, you’ll have to transfer your pension to the firm — likely based overseas — and it could invest the money in risky deals. The loan is repaid when you withdraw your pension, plus a hefty interest charge. The schemes are unregulated and against HMRC rules, which forbid you to access your pension early. If you do, you could end up with a tax charge of 55 pc.
Also, these are typically small firms. Should they go bust, your money would not be protected.
IDENTITY FRAUD COVER
IF YOU are ever offered identity theft insurance, say no.
It is supposed to cover any losses you incur if your identity is stolen, and can cost as much as £70 a year. But your bank is responsible for fraud losses — unless you have been negligent.
The sales practices of some firms, such as CPP, have also come under fire by the City regulator and they have been forced to repay thousands of pounds in compensation for mis-selling.
STRUCTURED PRODUCTS
THESE promise stock-market growth without the risk.
In the past, they were sold heavily by banks, building societies and insurance companies.
They are aimed at savers who need better returns than they get on deposit accounts. But they can be so complicated that even the people selling them don’t understand them.
Their guarantee to return your money is only as safe as the company behind the deal. It takes a well-trained eye to spot a good product — so unless you’re an expert, steer clear.