June 2024

Which scammy financial services product is costing you, your family or your friends thousands (maybe even tens of thousands) of pounds?

We have about £4trn in savings, pensions and other financial services products. The people who sold us this stuff and who manage our money pocket an almost unbelievable £1m every minute (£413m every working day) of our money for themselves making them a lot wealthier than the people whose money they have taken. It is likely that you, many members of your family and your friends are all being fleeced by financial services insiders. So, which scammy products are making you poorer?

Structured products -with interest rates being so low, this has provided banks with a wonderful opportunity to convince savers to put over £60bn into what are called “structured products”. These usually offer to pay savers rises in the stock market and guarantee their money back in full if the stock market falls. Only problem is that 80% of the benefits of owning shares comes from the dividends paid, not from rises in the market. Yet structured products don’t pay these dividends to savers. They’re little short of a scam to fleece ignorant savers.

Unit trusts – we’ve about £500bn in unit trusts and pay about £60m a day in charges to salespeople and unit trust managers. Your unit trust will claim their management fees are only about 1.25%. But actually after taking account of buying costs, selling costs, dealing costs and other fees, you’ll end up paying 2 to 3 times the advertised management fees. Yet if you just bought shares in say the 10 main companies in any stock exchange you fancy, you’d perform better than 90% of unit trust managers because you wouldn’t be paying their generous fees.

Pensions – we’ve about £850bn in pension savings. Studies have shown that because of the exhorbitant fees taken by British pension fund managers (about £100m each working day), we get about half the pension that savers in other developed economies would get for the same amount in savings.

SIPPS – Many people have realised that traditional pension funds are a rip-off and have started saving in SIPPS instead. Then they fall into a fatal trap. Instead of buying shares directly for their SIPPS, they put their money into unit trusts. So these complete bananas end up paying both the fees for their SIPPS and the unit trust managers’ fees – all in all probably about 4% a year – that’s 60% over 15 years – great for fund managers, not so great for savers.

St James Place and others of their ilk – Many savers get seduced into putting their money with investment companies like the (IMHO) total scam called St James Place. These companies then put this money into a few chosen unit trusts. Once again savers are left paying 2 lots of fees – those of the management companies and those of the unit trusts – dumb, dumb, dumb.

Annuities – When we reach 65 our pension company of financial adviser will pressure us into buying an annuity because they want our money as fast as they can get it. Problem is that most people will be pretty healthy at 65, but are likely to have started developing health problems by say 70. If they have health issues this entitles them to an “enhanced annuity” usually paying 20% to 30% more than a normal annuity. So most people would be advised to wait till at least 70 before buying an annuity as they’ll get much more for their money – and getting say £5,000 a year more for say 20 years adds up to a pretty hefty sum.

Equity release – Many pensioners are seduced into taking out equity release loans to help fund their living costs or grandchildren’s university fees. The average loan is around £55,000 which seems quite a manageable, modest sum of money. Trouble is that interest rates on equity release are so high that a £55,000 loan taken out at 65 would have ballooned to over £220,000 by the time the borrower reached 85, meaning that many people would owe the whole value of their home by the time they wanted to sell it and move into sheltered accommodation or a nursing home.

In my book PILLAGED How they’re looting £413 million a day from your savings and pensions I explain over 40 ways that financial services insiders are getting rich at our expense. Buying the book for just a few quid could be the best investment you, your family or friends will ever make.

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