In contrast to the IMA story today about falling investments, the Association of British Insurers has released figures that show regular investment into life and pension policies have risen by 3%. This is an increase from £836m in January this year to £863m by the end of October.
Mary Francis, director general of the ABI said that this was the first increase in regular premiums seen for 2 years. Whilst she seemed pleased with the increase she did not detract from her message that people must save more. Mrs Francis also said, “to ensure success we need the Financial Services Authority (the financial services industry regulator) and the Treasury to work closely together towards a realistic decision on the sales process and the price cap”.
Our View
Whilst everyone should save for their future, people need to be fully aware of where their money is going. For example, there is no point paying all of your spare money into pensions. What happens in an emergency when you cannot raise some money?
Our view is that people should save what they can afford. This should be saved into a mixture of pensions and other savings and, of course, to provide some form of protection. This could be life insurance, critical illness cover or unemployment insurance.
Whatever you can save on a regular basis, spend it wisely. Mrs Francis was quite right when she said that selling and pricing need to be agreed on. Policies that are sold to you without you understanding them is not good. How can you decide what else you need if you don’t understand what you have?
Also, in terms of charges, make sure you are not buying products with huge charges. If you are then any growth received by your policy will be reduced by the amount of the charges. Always take advice and always ask if you do not understand something you are being asked to buy.