Pensions Agency go in day in and warns of the type of loan known as senior bond. There are loans that big banks and some insurance companies offer and which is aimed at older people who can not get a conventional loan, for example due to low retirement income, but who have a low leverage housing. With a senior bond release capital that is tied up in the home. The interest paid on borrowed money instead of tax revenue from the pension.
The loans are expensive, and the interest rate is usually 2-3 percentage points higher than for a conventional bank loan. The loans, in other words lucrative for banks and insurance companies, where the high interest rate is justified by the loan involves a risk of the Bank. But some companies are not content just to sell loans with high interest rates to low-income pensioners.
According to both the Pension Authority and Consumers Insurance Bureau are numerous cases where the company has invited people with low pension income to mortgage themselves higher – for then placing the borrowed money in financial products.
– We know that this occurs. And it’s absolutely most common in terms of senior bond insurance solution, says Monica Peterson, pensions expert at Pension Agency.
The only player offers senior bond insurance solution is Folksam. There goes layup on the loan – taken at SBAB – placed in an endowment insurance with Folksam. In this the borrower can then choose to invest the money in a so-called traditional life insurance or mutual funds. For traditional life insurance, a fixed fee of 288 kronor and 0.8 or 1 percent management fee. Anyone who chooses linked insurance may pay 295 kronor in fixed fee and 0.7 percent in management fees.
– Seniors with low incomes are encouraged to borrow more to take even greater risks and pay more in fees. It is absurd. There you can talk about information disadvantage between customer and insurer, says Monica Peterson on Pensions Agency.
On Consumers Insurance Bureau has received many calls from people who received offers to take higher senior bond for to place in the Folksam savings.
– I got a call just now from a person who does not even have to take a loan, really, but of a vendor had been asked to take a high loan and simultaneously promised high returns. It is unreasonable, says Ulf Rydstedt, a lawyer at Consumers Insurance Bureau.
He continues:
– We will received call after call of people who feel the fear and concern about what this approach really means, says Ulf Rydstedt.
According to him, the commission from fund companies to Folksam drives Folksam sellers or other distributors of Folksam products to encourage pensioners to use leverage higher and invest in financial products.
– One must assume that the benefits are based on volume. And here is the volume very big, he says.
Folksam says Jan Råstock, director of life and savings offers the private market, to SvD Business:
– We spend a lot of commitment to our customers to feel financially secure retirement. If anyone understands that we called for loans in excess of their needs, so we apologize for that.
Do you think it is fair to retirees who already have low incomes must take out loans to invest in financial products with fees?
– All the purchase of this product is preceded by advice and the advice we are obliged to advise the customers who do not need the product. There is a set of rules to be followed and if it is not followed, we of course seriously.
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