Could life assurance companies be ripping us off?

Have you ever been mis-sold something by a financial services company? Odds are the answer is yes.

If you’ve ever taken out a loan you’ve probably been brow-beaten into taking out Payment Protection Insurance with it, despite the fact that this is – as Cliff D’Arcy of the Motley Fool puts it – “the worst insurance ever”.

If you took out a mortgage a decade ago you were probably mis-sold, or think you were mis-sold, an endowment policy. Add that to all the hideously inappropriate investment muck we’ve all had hoisted on us over the years and it’s no wonder that so many of us aren’t exactly enamoured of the industry.

But the most irritating thing about it is that it never seems to learn. Look at the Self Invested Personal Pension market. I love SIPPs, which allow you to buy a pension ‘wrapper’ and then invest your own pension assets as you see fit. I think they are one of the best innovations to come out of the often overly creative minds of the market for years.

But they aren’t for everyone. If you are never going to invest in anything except for the funds of one company for example, they are pointless. And if you have only a small pension, which you intend to keep in mainstream funds, you are likely to find you are better off with a stakeholder pension.

However, this isn’t stopping the life assurance companies having a go: they are paying hefty commissions (up to 15%, says The Scotsman!) to advisers to transfer customers out of old-fashioned pensions into their SIPPs and then – this is the good bit – having them buy their funds with the SIPPs. Friends Provident, says the FT, requires its SIPP holders to invest £20,000 in its insured funds. Does this make sense? The FSA isn’t so sure: it is conducting an inquiry into the sales of SIPPs by financial advisers.