Over-50s face overpriced productsOlder consumers not always getting a good deal
17 January 2015
Which? analysis of 55 financial products designed for over-50s has found that some are a rip-off compared with alternatives.
Avoid bad deals
We found bad deals in five areas targeted at the over-50s, despite some coming with eye-catching celebrity endorsements and free gifts. Here's what we found:
Over-50s life insurance plans
These plans usually offer poor value with whole-of-life plans often offering a better return. For example, we found premiums of £50 per month resulting in pay-outs varying from only £10,185 up to a more generous £13,999. Whereas some whole-of-life insurance policies cost only £27 per month yet pay out £14,000. You may pay in more than you will ever receive.
Find out more: Life insurance - find the best policy for you
We found that specialist car and home insurance for over-50s were often more costly when compared to standard insurance. For example, compared to the cheapest car insurance we found, in our scenarios, specialist policies for over-50s cost up to £1,075 per annum more. When we looked at home insurance, the difference was £364.
Find out more: Car insurance - more than 40 car insurance companies reviewed
Savings accounts for the over-50s
Despite all saving rates being low across the market, we found over-50s savings accounts offering even lower rates of interest. The worst examples our researchers found were Progressive BS’s Premium Return (0.05%) and Danske Bank’s Midas Gold (0.10%), for balances of £5,000. Despite the low interest-rate environment, savers can achieve up to 1.5% in an instant access savings account on the general market.
Which? Money Compare table: Savings accounts - hundreds of accounts compared
We found equity release schemes an expensive way to borrow money, even as a last resort. Common forms of equity release could mean consumers pay more than three times the loan amount back after 20 years, drastically reducing any property value. Interest rates for equity release products, at between 5.89% and 7.75%, are much higher than standard mortgage rates for 10-year deals, at around 4%.
Find out more: Equity release explained - is it right for you?
While some people find funeral plans offer them peace of mind, we found many schemes had potentially costly catches, such as limits on cremation/burial costs and high cancellation fees, with Golden Leaves charging a cancellation fee of 20% of your initial lump sum. Putting premiums into a fixed-rate savings account or leaving an estate will make it easier to meet funeral costs.
Find out more: Pre-paid funeral plans - which type of plan is most suitable for you?
Many of the these products are marketed to make people think they're getting a special deal.
Edward Gardiner, a marketing expert from Warwick University, told us: ‘If there is a crowded market with many suppliers, people may choose a company based on one attribute, ie perception of knowing people like me. Over-50s specialists will stand out, even if their abilities are no different to other companies.’
Editor of Which? Money Gareth Shaw, said: 'Some companies are cashing in on the over-50s through poor-value products and clever marketing. Make sure you shop around and never assume that specialist products and providers are the best deal for you.'
- Find the best car insurance - the Which? guide to car cover
- How to find the best savings account - what type is best for you
- Equity release schemes - how these schemes work
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.