'Beware the ‘Over 50 Sun Life Axa Plan’... blog discussion

MSE_Martin wrote: »

Not necessarily - it could take your money and put it in more complex savings and investments to generate an income on it. So with the income on the money paid in - assuming its done right, you could afford to generate a payout beyond even the average life expectancy.

True, but that would involve Sun Life Axa bearing the investment risk themselves. Instead, the payouts well below average life expectancy would suggest that their investments of your premiums have to perform spectacularly badly before they turn an overall loss on the product. In effect, the policyholders underwrite a nice buffer against failed investments, possibly encouraging them to take bigger and bolder risks. At least the payouts themselves are 90% underwritten by FSCS.

lemontart, there's no need to mess around with an insurance company to arrange payment. Present a death certificate and invoice for funeral costs from an undertaker to a major bank like NatWest that you have an non-joint account with and they will send to the funeral director a check for the costs, provided the account has sufficient money to pay them. No need for a will or appointed executor. Check with your bank and find out how they handle it. Takes less than a week for NatWest to take care of it.

£2700 is more than a simple funeral with cremation costs. You've little chance of dying before you're paid out more than the cost of this plan, since it takes only eleven years, ignoring inflation, to pay more than you get out (assuming £2700 and £20.59). At 3% inflation, in today's money that £2700 would be worth just £1950.

Best to enjoy the money while you're alive and just keep normal emergency funds around. Those will be sufficient to cover the funeral costs and your daughter will surely be happier for you to have been better off for the 38 or so years that half of today's fifty year old women can expect to live for.

Most people under-estimate how long they live. Even the press routinely gets it wrong, as the Times seems to have done here, by using life expectancy at birth instead of cohort life expectancy for those of the age being considered. Life expectancy at birth is many years less than the average age to which someone who has already survived childhood illnesses, teenaged accidents and early heart attacks can be expected to live. Women aged 49 today will on average live 39.6 more years, men 36.3 years.

For a man aged 65 today the expected number of years to live is 21.3, to age 86.3. For a woman it's 23.9 years to age 88.9.

Sadly I have an elderly relative who's been paying into this plan for many years, had he understood the implications of it paying less then there's no way he would have taken it out. How can they do this to vulnerable elderly people and be allowed to keep on doing it?

I don't think I could ever use companies like AXA or any other "life plan". You are basically giving your money away to these companies. Sticking £10 a month in to a savings account isn't hard work and come death, you'll have much more money than what these companies would pay out.

My grandmother has one of these stupid plans and pays £5 a month to them, she's in pretty good health and she'll no doubt pay in more than what will be paid out. I've told her countless times she'd be better off sticking the money in a savings account but it doesn't seem to be getting through to her. All the money that she has paid in is most likely sitting in the companies bank accounts or whatever, earning them interest so they can buy their lavish mansions, pay for celebrities to do their adverts and whatever else.

It's a total con.

Twenty years ago, my first full-time job was for a life assurance company, and I had to work on the section that administrated the claims on this type of policy - that's how long they've been around. I spent two years having to explain that the terms of the policy were made clear at the outset, that no health checks had been made, and that the policyholder knew what the payout would be. All of which were true, but that didn't make the policy seem any fairer. I hated it.