The over-50s face overpriced products thanks to clever marketing, TV and radio advertising campaigns with respected celebrities
You cannot watch daytime television without seeing a respected TV personality giving their endorsement to a variety of financial products aimed at the over 50’s. Why people like Michael Parkinson feel the need to flog products like this after a highly respected and successful career is probably another debate altogether.
With a bit of clever marketing to make you feel special – don’t forget the free pen or M&S vouchers – and the reassurance of somebody we have come to trust it is no wonder their are hundreds of thousands of these over 50 plans policies in place in the UK.
Maybe though it is a generational problem. As the current generation die-out and are replaced by the next it does raise the question: are these policies on a terminal decline? I must admit I have never understood why people just don’t stick the money in an ISA or invest the money for 5 or 10 years.
These over 50 plans are obviously aimed at the over-50’s and include life insurance and funeral plans, but according to consumer group Which? some can be a rip-off. Which? carried out an analysis of 55 over 50 financial products concluding when compared to other alternatives these products offer poor value to consumers.
Over 50s life insurance plans
According to Which? these over 50 plans usually offer poor value when compared to whole-of-life plans. The risk with these types of plans is the realistic chance you will end up actually paying more in than you will ever receive in a payout.
Also these over 50 plans can hide a nasty clause or two in their small print. One such clause states that if you miss even one payment the policy will be cancelled and you will not receive any money back, even if you have never missed a payment in twenty years.
Insurers such as AxA Sun Life sell these over 50 plans with the promise you don’t need a medical and a guaranteed cash lump sum on death which can be an ideal way for funeral planning. But if policyholders take out these policies in their late 50’s or early 60’s and live till their 90’s, they will pay far more in than the guaranteed return.
For example, premiums of £50 per month resulting in pay-outs varying from only £10,185 up to a more generous £13,999. Whereas some whole-of-life insurance policies cost only £27 per month yet pay out £14,000.
|Woman aged 60|
|Contribution||Promised lump sum||Age at which contributions equal lump sum||Avg life expectancy of woman aged 60||Savings equivalent|
|Man age 65|
|Contribution||Promised lump sum||Age at which contributions equal lump sum||Avg life expectancy of man aged 66||Savings equivalent|
It is also worth noting that only a few insurers allow you to stop paying premiums when you reach 90, but the majority don’t. This would mean paying in a substantial amount more than your premiums, making this type of policy a rip-off. AxA Sun Life have in excess of 800,000 policies in place and it is clear to see that they make their money on policyholders who live longest and take a hit on the ones that die quickly.
While some people find funeral plans offer them peace of mind, Which? found many schemes had potentially costly catches, such as limits on cremation/burial costs and high cancellation fees, with Golden Leaves charging a cancellation fee of 20% of your initial lump sum.
Putting premiums into a fixed-rate savings account or leaving an estate will make it easier to meet funeral costs according to Which?.
Many of the these products are marketed to make people think they’re getting a special deal. Edward Gardiner, a marketing expert from Warwick University, told Which?: ‘If there is a crowded market with many suppliers, people may choose a company based on one attribute, ie perception of knowing people like me. Over-50s specialists will stand out, even if their abilities are no different to other companies.’
Editor of Which? Money Gareth Shaw, said: “Some companies are cashing in on the over-50s through poor-value over 50 plans and clever marketing. Make sure you shop around and never assume that specialist products and providers are the best deal for you.”