Investors buying life assurance savings products in the hope of qualifying for free shares in the future should exercise extreme caution.

In the past three months alone, up to 20,000 people are understood to have signed up for a Canada Life with-profits endowment policy, based on speculation that the company will soon change its status to a publicly-quoted company. These policy-holders, it has been suggested, would then automatically qualify for a windfall payment of free shares. A number of other companies have also been identified by brokers as being likely to yield similar dividends for investors in the short-term, namely Scottish Provident and Standard Life, for the holders of endowment-type products.

Unfortunately, in all of these instances, the sales pitch is based on inaccurate information.

Canada Life, Scottish Provident and Standard Life have all stressed this week that none of these companies are planning a flotation and have warned investors against taking out these policies as a short-term investment.

At the moment Canada Life's administrative division is virtually snowed under with the volume of new policies arriving daily at its offices. In many cases, the brokers and sales staff have run out of the necessary policy documentation, with thousands of investors now making applications on photocopies of the original policy form.

If you are among these new policy-holders, you should be aware that you have purchased a product which has largely disappointed investors over the years, with many just about getting their money back or even ending-up financially worse off for the experience. For brokers however, this remains a highly attractive product to sell, as they earn substantial commissions on each policy sold.

The minimum cost of taking out a Canada Life with-profits endowment product before Christmas was £25 a month. This has since been increased to monthly payments of £50 in an attempt by the company to stem the number of speculative purchases.

By paying £50 a month into one of these policies, you are committing to pay £600 a year to the company, say for 10 years, which means you would expect to make more than £6,000 when the policy matures.

But just because you are paying £600 a year, does not mean that this is the amount being invested in your policy. The amount that actually goes into the insurers investment funds is your £600 less brokers commissions and other associated costs.

As these products are structured to yield long-term gains, policy-holders pay the bulk of the costs in the first year. So if you are planning to cash in the policy after a year or so, you will not get your money back.

Over 10 years, the broker's will earn up to £2,000 in commission on your policy, based on the Irish Insurance Federation basic commission rates. Policies taken out for up to 15 or 30 years will incur substantially higher commissions payments.

In most cases, you would have to hold a 10year policy for at least four years, to break-even, and five years or more in a longer-term policy.