Why is our life cover so costly?

Among the several elements to my complaint about St James’s Place Wealth Management is the lack of explanation for the eight times increase in costs over 16 years in our life cover plan. We have this for inheritance tax provision.

We are also concerned about an investment in a Spanish bank, which is described by St James’s Place as short-term. We had hoped that a life policy was a long-term investment. It would appear that there was no monitoring by St James’s Place on this investment in order that we might respond to the lack of performance. Our other investments with St James’s Place are switched without referral when they underperform.

Also we cannot understand how our “Partner” would receive commission as he has not been in contact over this issue for the past two years. PV, HANTS

This was reviewable joint whole-of-life assurance to pay out on the second death. Initially the sum assured was £250,000 escalating over the years to £545,718. At the outset the annual premiums had been £1,597 and had now become £11,808. This is a legacy product that hasn’t been marketed for 10 years but on which the relevant financial adviser of those policies still running still gets commission.

At the five-yearly reviews in 2006, 2011 and 2016 you chose to increase your premium to maintain the life cover.

St James’s Place points out that the life cover plan was not invested in a Spanish bank, but an element of the fund was invested in the Deposit Fund (later renamed the Money Market Fund) and remained in it throughout. This, though, had not been your intention and was not shown on the illustration although, I understand, it did appear on the application form. This fund

selection may have arisen, St James’s Place now acknowledges, as a result of a misunderstanding.

You had reached an apparent stalemate over the issues before writing to me.

My involvement led to a series of meetings between you and St James’s Place and various conversations over a long period of time.

This led to an offer to put you back in the position you would have been in had the money not gone into the deposit fund. The current position of the plan has been recalculated to reflect how it would have been had it been invested across a range of managed funds in line with the illustration you had

been given at the outset.

It has refunded £6,573 for excess premiums paid because of this. It has also added £1,410 in respect of interest on this amount. This £7,983 has been rounded up to £8,000.

It has switched the remainder of the existing units into today’s equivalent of the fund originally illustrated, reflecting any fund changes in the intervening period. In addition, at your request, it has reduced the level of cover to £500,000 and removed the automatic indexation from the plan.

All this has led to a reduction in the yearly premium to a much more

affordable £6,193 per year rather than the £11,808 it had been for the higher level of cover.

The policy will still be subject to five-yearly reviews, the next one being in 2021.

St James’s Place is also paying £2,500 as a gesture of goodwill and in recognition of the trouble and upset this matter has caused. This takes the total offer to £10,500.

Finally, given the breakdown in the relationship with your St James’s Place adviser, you now have an alternative adviser.

Within its statement St James’s Place said: “We’ve

followed up with Mr and Mrs V to provide a full explanation of the charges applied to their whole of life protection plan, which are considerably lower than the amount they believed had been paid.

“We’re sorry that the service provided dipped below our usual standards on this occasion. We’re grateful for the opportunity to resolve their concerns.”