Warning on over-50s insurance plans Lump-sum plans offer poor returns for pensioners

17 December 2011

Over-50s plans

Returns on over-50s plans are frequently low

Over-50s plans offer poor returns for a hefty outlay, Which? has found. The plans pay a lump sum upon death, but this is often less than the amount paid in.

Research has revealed that a 60-year-old man paying £15 a month into a plan would be entitled to an average lump sum of £2,980 upon death. Payments would continue until he reached 90 or died. 

If he lived to 90, he would have paid in £5,400. If the same monthly payments were put into a cash Isa earning 4% on average over the same period, he would accrue £10,313 and outstrip the average over-50s plan lump sum by age 73.

Over-50s plans are inflexible

The lack of flexibility offered by the plans also makes them less attractive. If a customer stops making payments then they forfeit the plan pay-out, and may not even get their premiums back. Additionally, as interest is not earned on the amount paid in to the plan, inflation will erode its true value. 

Commenting on the over-50s plan market Which? chief executive Peter Vicary-Smith said: 'For most people, over-50s plans are incredibly bad value. They’re inflexible and, for the majority of customers, they will pay out far less than has been paid into them. Our advice is to steer well clear of these plans, and to put your money into a cash Isa instead.'

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