Almost everyone has an exorbitant pension at home. An extortionate policy, life insurance with mortgage and extortionate pension were common. Far too high costs are the hallmark of these policies. There is a compensation scheme and the Wabeke standard for both the extortionate policy and the extortionate pension. In addition, there is the ruling with Aegon’s Koersplan and the compensation scheme for extortionate policies. In 2020, there are now cheap policies available through Brand New Day as an alternative to an extortionate policy.
Compensation for an extortionate policy
Insurers have stated several times that they are prepared to accommodate customers with extortionate policies. They want to offer their customers a cheaper product. Anyone who wants to cancel their usury policy without a penalty is now most likely allowed to do so. So check whether your policy is also eligible for a compensation scheme.
What is a usury policy?
An extortionate policy is an individual investment insurance policy in which you, as a private individual, deposit money that is invested by an insurer. Many people bought an extortionate policy as a nest egg, for a supplementary pension or to pay off the mortgage on their house. Unfortunately, these usually did not concern transparent, but extremely complex financial products. Marketed because the intermediaries could earn a large commission from this. Unrealistic calculations were often presented that gave the customer an incorrect impression of the costs and risks of the policy or insurance. After all, stock markets could only rise and anyone who did not buy the policy was really a thief of their own wallet, it was said. Anyone who thought they could build up a large capital in this way ended up penniless years later, due to disappointing returns and excessively high costs. All kinds of costs are charged with an extortionate policy, especially in the early years of the policy. Consider costs such as:
- The costs for additional insurance such as term life insurance;
- The administration costs;
- The management costs;
- The commission for the advisor;
- Buying and selling costs for investing on the stock exchange can increase significantly if there are many transactions.
Those who took out a usury policy were often unaware of these high costs and were thus significantly disadvantaged.
Interest effect or leverage effect
The interest effect or leverage effect means that the costs and risk premiums of the policy are not paid from your gross premium deposit, but from the investments. Then your gross premium is first fully invested and then part of the investments is sold to pay the costs and risk premiums. This means that the assets within the policy may be debited. Especially at the beginning of the policy, when the costs are high, your assets will not increase but will decrease. This mainly occurs with single premium policies and high/low constructions and high death risk coverage.
The Wabeke standard
After many complaints and litigation, the financial ombudsman Wabeke came up with the so-called Wabeke standard. The Wabeke standard means that the costs may amount to a maximum of 2.45% of the accrued value per year, if the annual contribution does not exceed 1,200 euros. But those are still huge percentages.
calculation example extortionate policy according to Wabeke standard
Suppose the return is 6% and the policy lasts 30 years, then 2.5% or 42% of this may be charged in costs on the value of the policy.
Damage claim extortionate policy
Many policies have been charged too high, which is why the ombudsman believes that insurers should refund money. His estimate is that it would amount to 2 billion euros, but others think this is still far too little. The holders of an extortionate policy are therefore in a dilemma: ceasing the policy is usually not advantageous because the highest costs have already been incurred in the early years and ceasing now will only cost more money. Anyone who takes out a new policy has become older and therefore pays more premium and is then confronted with the costs of a new policy. It is true that you should not let your claim for compensation expire. The claim for damages expires after 5 years.
Damage compensation for extortionate policies
Several major insurers have also proposed compensation themselves: SNS Reaal, Delta Lloyd (=NN), Fortis (=ABN AMRO) and ING have reserved between 300 and 780 million. Delta Lloyd announced in September 2008 that it had settled with the Verliespolis and Woekerpolisclaim foundations for an amount of 300 million euros to almost 300,000 victims. Aegon has also made settlement proposals.
What is a usury pension
A usury pension is a semi-collective pension scheme . The employer takes out this for his staff with an insurer or intermediary. This usually concerns employers with relatively few employees. These policies were bundled in a master contract and thus became semi-collective. By packaging the semi-collectively, intermediaries could earn significant commissions. The amount of the pension depends on the success of the underlying investments and here again the high costs charged. Costs that are comparable in structure to an extortionate policy. There has also been a lot of commotion about the high costs and relatively low returns regarding extortionate policies. The result of this commotion is that the Dutch Association of Insurers has announced that it will come up with a compensation scheme. Costs must be reimbursed if they are above a certain limit: 9.5% annual costs on premiums and 1.5% on the value of the invested capital are permitted. This is in stark contrast to the Wabeke standard. What makes matters even more difficult is that the costs of insurers’ investment funds are often not transparent.
Brand New Day and bank savings
Transferring your policy is not always possible and can also be very disadvantageous. Anyone who wants to know whether transferring an extortionate policy or extortionate pension is beneficial can take a look at the calculation tool from newcomer Brand New Day . In any case, it gives you an indication of the possibilities. And anyone who wants to take out a new policy with a bank or insurer is always wise to request different quotes and compare them carefully. Both on costs and the projected return. Because there are plenty of good financial products available and saving for later is becoming increasingly important. There are still several ways to build up an extra pension yourself, including with the pension agreement in 2020.
Aegon compensation scheme
Finally, Aegon has now announced a complete compensation scheme for its extortionate policies and will also pay compensation for the Aegon Course Plan.
Final usury policy and usurious pension, extortionate in 2020
Anyone who has an extortionate policy can continue it, make it premium-free, surrender it or refinance it. In other words, what are you going to do, because there are now good alternatives on the market that will be much better for you. Staying put usually costs money. However, more and more insurers are offering a compensation scheme. Often a plaster on the wound, but still.