Life offices have been advised to explain the benefits of selling with-profits endowment policies on...
Life offices have been advised to explain the benefits of selling with-profits endowment policies on the traded endowment policy (TEP) market, following new guidelines published by the Personal Investment Authority (PIA).
Unlike IFAs, life offices do not have a regulatory duty to inform customers surrendering their policies of their selling options. The PIA claims that policyholders can expect a better cash value for the policy if it is sold on the TEP market.
David Carrington, sales and marketing director at Policy Plus, said the guidelines should help encourage more consistent advice. "If a customer has a standard with-profits policy that has been running for five or six years through a reasonably performing life office, there is a significantly high chance that they will make more money by selling the policy than surrendering it. There is a clear benefit in selling with-profits policies on the TEP market.
"My advice would be that people should seriously consider selling rather than surrendering. Because life offices have had no regulatory duty to inform customers about the benefits of selling, consistent advice has not been given. The guidelines should remove the 'hit or miss' on whether customers are told about their options or not," said Carrington.
Although the PIA is unable to enforce the duty upon life offices, it is hoped the guidelines will be followed by all market players to help improve consumer choice. Providers already offering information to customers have been advised to ensure that it is made available at the time of surrender, rather than when the policy is taken out, in order to remind customers of their options.
Rob McIvor, spokesperson for the FSA, added: "People should be told if they have the option to surrender their endowment policy. It is a consumer right that they should be able to make a decision with all the information rather than just partial knowledge."
