PPP lifetime care to withdraw long term care bond due to poor investment returns
Long term care (LTC) bonds could disappear from the market by the end of the year, due to poor investment returns as providers undergo a five-year review of policies.
PPP lifetime care has announced it is to withdraw its LTC bonds from the market this summer. No new policies will be sold and current policyholders could be subject to a premium hike, following its review this year.
The only other provider currently operating in the market is Scottish Amicable. Although it refused to confirm plans for product withdrawal or premium increases, Scottish Amicable will also be conducting performance reviews by the end of this year. In light of poor investment conditions, it is thought that policyholders will need to pay more to make products viable.
Steve Muir, marketing manager at PPP lifetime care, said: 'Although risks are highlighted in the key features document given to customers, we have experienced two years of particularly poor investment returns. Some people are expecting the review to increase premiums or reduce the benefits. We have stopped marketing our current LTC bond and it will be withdrawn in either May or June. We will be introducing new polices called asset protection bonds instead.'
LTC bonds, which combine insurance with an investment bond enabling policyholders to retain the investment value of the plan, were first launched five and a half years ago.
According to Muir, there are currently 12,000 policyholders only 1,000 of which are with PPP. With only two providers in the market, this means Scottish Amicable has the majority share.
Although it confirmed there would be a review of products by the end of the year, Scottish Amicable was unable to confirm whether any action would be taken.
'We intend to conduct an internal review of LTC bonds in the third or fourth quarter this year. It is important to understand these are primarily investment products. We cannot be prescriptive about how internal assessments will turn out,' said Darragh Leeson, spokesperson for Scottish Amicable.
Owain Wright, head of the Care Funding Bureau, was not surprised by the news, but said it may come as a shock to policyholders.
'The investment environment is very different to five years ago. However, the writing was on the wall even then. I am sure some policyholders will have neglected to note that regular reviews ' where premiums can go up and benefits can be reduced ' are part of the package. For some people this could come as quite a shock. The situation could be likened to what we have seen with endowment policies ' the market is just smaller,' he said.
