St James's Place Life Assurance Premium Hike

Doorman76

Hi,

My wife has had a policy with St James's Place for about 10 years now.

Sold to her as life assurance and critical illness cover (starting to wonder what it is now).

It's their Flexible Protection Plan.

Just recieved a letter from sjp saying that since the stock market hasn't performed as they would haved liked that the premium will have to double to maintain the same level of protection.

The options we have been given are

A) Half the amount the policy pays out and keep the same premium
Double the premium and the amount of cover stays the same
or
C) Keep everything the same and review in 5 years time. (SJP are saying that they predict the premium to be increase even more by then.)

Very confused.

Thought that once a premium was set that SJP would have to honour the amount of coverage.

Any one know that the story is with this?

Thanks,
Neil

dunstonh

Thought that once a premium was set that SJP would have to honour the amount of coverage.

No. That only applies to guaranteed premiums. These expensive SJP life plans are not guaranteed and never have been.

Any one know that the story is with this?

Its exactly how you put it.

If she is in clean health (i.e. no issues) then she should look to replace it with a modern term assurance. Not from SJP. They are even more expensive than the banks (And that is saying something).

Doorman76

I had feared as much

Why would anyone choose to double their premiums paid to SJP when SJP can turn round in 5 years time and double them again??

SJP are taking zero risk - they take the premiums every month and if they dont make money they just turn round and charge you more or cut your cover.

:mad::mad::mad::mad:

dunstonh

Why would anyone choose to double their premiums paid to SJP when SJP can turn round in 5 years time and double them again??

On the flip side, she probably has obtained 10 years of cover cheaper than she should have (ignoring the fact SJP are expensive to begin with).

SJP are taking zero risk - they take the premiums every month and if they dont make money they just turn round and charge you more or cut your cover.

They have probably lost money on this. So, there is a risk in it for them as well.

These types of plans went obsolete by the mid 90s. However, SJP, Allied Dunbar and a few others kept selling them long after everyone else stopped. You can still get a variant today but they are rare.

weighty1_2

One thing to consider Doorman 76, it that this plan is probably a whole-of-life plan and it has critical illness cover attached. If you keep it, and continue to pay the premiums (whether for a reduced level of cover, or take the hit of a higher premium) then there is an abosulute guarantee that the plan will pay out at some point in the future.

Also, most provider of critical illness cover will not offer terms that extend beyond a clients 70th birthday in many instances, although some do run unntil age 75. By switching to a term plan you are losing the certainty of a payout but will be able to benefit from a far lower permium and one that can be guaranteed for the term of the policy.

I suppose it all depends on why you advisor recommended what seems to be a WOL plan in the first instance?

Doorman76

Yes the plan is Whole of Life and so it will pay out eventually.

My concern is that if SJP can change the premium or cover at will what is to stop them halving the cover in another 5-10 years. If that was to happen the plan would be worthless.

kingstreet

The "flexibility" of such a plan carries a cost.

Most of these flexible unit-linked whole life policies were sold on the basis of maximum cover. This meant you got the most protection and the lowest savings for the first ten years.

At the plan review, the savings element would then be used to subsidise the future premiums. As the savings element was small, the premiums would normally have to increase to keep the same cover as before, or you could have lower cover for the same premium.

This places many people in a difficult position as they didn't realise they were signing up to something which would perhaps not meet their protection needs beyond the first plan review in ten years.

Is the plan reviewable every five years now, or is there another ten year period before the next one?

If it were me, I'd be tempted to consider keeping the premium as it is and letting the sum assured fall. Get quotes for a term assurance to see what the difference in cost might be if you run two plans side by side. Your need for protection may reduce when your kids are grown up, or your mortgage is repaid, so think about using that period as the term for the additional plan.

The whole life plan run on a balanced cover basis (which is the same premium lower cover option) may be able to support a higher protection element in a few years time, should you need it then.

Doorman76

The next review is in 5 years time.

Doubling the premium being paid is not really an option so looks like we'll either defer for 5 years or half the cover and look to take out some term life assurance.

Doorman76

Hi,

I just wanted to give an update on this one.

My wife sent a complaint email to SJP a few weeks ago complaining about the 100% premium rate rise.

She has just recieved a letter today from SJP saying that they will pay back the 10 years premiums plus interest! :T

We really weren't expecting this at all. They are offering this because when it was sold they were basing all their figures on an average 9.5% growth per year.

It pays to complain!

Now the cynical voice inside my head is wondering why they are offering to pay back the premiums so easily?? The letter says that if we aren't happy with the offer to take it up with the financial ombudsman.

Anyone think there is a bigger case here or should we just accept the offer?

dunstonh

Now the cynical voice inside my head is wondering why they are offering to pay back the premiums so easily??

They are required to check the suitability of the recommendation and how it was sold and set up as part of any complaint. Even if you didnt ask it. Chances are they found faults in it. Hence why they have now voided the policy as if it didnt exist.

Anyone think there is a bigger case here or should we just accept the offer?

Doesnt matter if there is. You have got the maximum you are ever going to get.

kingstreet

As dunston says, a return of premiums, plus interest, is the best result you can get in such circumstances. As you had the cover for ten years, you should view this as a victory.