Offshore
Tep Purchase
The possible mis-selling scandal of endowments has sparked
a surge in the number of policies being surrendered rather than
retained, says Lee Portnoi, managing director of Absolute Assigned
Policies.
This has been an advantage to the investors in traded endowment
policies as supplies, which have historically been very limited
for investors for every policy, are now increasing.
He believes that despite reductions in bonus rates over the
last few years, TEPs remain a low risk and relatively high yielding
investment that has become the component of many international
investors’ portfolios and has helped push the trade to
an estimated £500m per annum.
Offshore Tep Purchase - Current Crisis
“The current crisis in the Middle East and subsequent reverberations
around the world markets have caused many investors to re-think
their investment strategies,” Portnoi says. “Wall
Street suffered its fifth biggest fall ever recently and continued
political uncertainty means that making the right investment choice
is even more critical.
“There are several benefits of investing in TEPs. They
are low risk, secure investments providing capital guarantees.
The policies are issued by substantial and highly-rated insurance
companies who have combined assets of over £440 billion
invested in gilts, blue chip shares, property and other secure
forms of investment. The basic sum assured and accumulated bonuses
are guaranteed by the assurance company, which additionally
commits each year to pay further bonuses, including a terminal
bonus when the policy matures.”
Offshore Tep Purchase & Investors
Investors can choose to invest in a managed fund, which invests
in TEPs on their behalf, or purchase policies directly themselves
from a market maker.
The guaranteed element of a mid-term endowment policy, together
with the favourable returns when compared to many other forms
of investment, means investors can obtain a relatively high
yield with a minimum of risk. Pricing discount rates for TEPs
are at present between 9 per cent and 13.5 per cent, varying
according to the time to maturity.
Investors purchasing TEPs don’t have to pay any commission
or administration costs, just the purchase price and the premiums
until the policy matures.
|
