Another dubious feature of these plans is that they have no paid up value. It was always the convention with a life policy for a limited number of years, that there was no value if premiums ceased. Policies that continued for the whole of an individual's life did however have a value if premiums ceased. This value doesn't exist on this type of plan, so premiums have to continue for life and the entire value is forfeited if they cease. I'm surprised this doesn't come into the FSA's oversight as an "Unfair Contract Term". I could believe the no value clause is driven by the FSA's own rules, as it enables the providers to avoid having to treat the contracts as investments and disclose reduction in yield and other investment related material.

I don't think it dubious at all.

Traditionally, the only whole of life policies available were investment backed, which created a 'value' which could be utilised to continue to fund the policy if premiums ceased, or to encash.

The underlying funds being utilised for these policies was the same as those for endowment policies, and we've all seen what has happened to these recently, with people who have endowments being warned that the policy will not produce enough to meet target.

With a whole of life policy, the plans are usually reviewed every ten years and if the pot being built up is insufficient, the premium can be increased or the level of cover reduced to reflect any underperformance of the accruing fund. If someone had selected the maximum cover possible at outset, there will be little value in that pot in any event, inevitably leading to such amendment.

The advent of policies that have no such issue is actually a good thing, as you can now buy a guaranteed payout on death for a fixed monthly cost, with any adverse market conditions creating costs that are borne by the provider rather than the policy holder. This is a huge improvement upon the plans that included an investment element which was required to perform in order to maintain the benefits set in place at outset.