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Last Updated: Saturday, 25 February 2006, 13:59 GMT
Standing orders: The final curtain?
By Bob Howard
BBC Radio 4's Money Box

For decades people have made payments by standing order, but now some life companies are demanding clients change over to direct debit, Money Box has learned.

Man at a computer
With standing orders you set up the payment with your bank

With standing orders you are always in full control over the amount and when payment is made. But with direct debit, it is the firms receiving the payments who call the shots.

Money Box listener Tim Shardlow from Kent has been using a standing order to pay the same amount into his endowment policy every month since 1985.

This month his insurer Phoenix Life and Pensions told him he had to change over to direct debit because - as of March 2006 - it would no longer accept payment by standing order.

There are now almost six times as many direct debits as there are standing orders.

It seems that, as life companies have the power, they can do what they want
Tim, Money Box listener
Most life companies already do not give new customers a choice: they have to pay by direct debit.

Tim does not want to change because he knows that, like other endowment customers, his monthly premium never varies.

"One feels a little bit more in control when you have given an instruction to your bank to make a payment," he told the programme.

"It seems that, as life companies have the power, they can do what they want."

Within rights

Phoenix Life and Pensions said they had asked 12,000 customers to make the change from standing order to direct debit because it is cheaper, quicker and easier to apply.

In a statement it said it had only meant to recommend customers change, not demand it, and it said it was writing to Tim to apologise.

Any business can decide it doesn't want to take your card or your cash
Gemma Smith, Apacs
It is now rewriting the letter being sent out to other customers.

Whilst other life companies said they had no plans to ask customers to make the switch, Britain's biggest general insurer, Norwich Union, confirmed that it might look at doing it too.

Gemma Smith from APACS, which runs the UK's payments system, said firms are within their rights to insist on what form of payment customers use.

"Any business can decide it doesn't want to take your card or your cash," she told the programme.

"They can choose to turn away your business at any time. Whether that makes good business sense remains to be seen."

BBC Radio 4's Money Box was broadcast on Saturday, 25 February, 2006, at 1204 GMT.

The programme will be repeated on Sunday, 26 February, 2006, at 2102 GMT.

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