Secure
Offshore Investment
TEPs ideally suit the needs of investors who require a combination
of safety and security together with growth. Such investors
are often wary of investing directly in stocks and shares or
in equity-linked vehicles. Those who invest in a TEP are safe
in the knowledge that in most circumstances they cannot lose
their initial investment provided that they continue to pay
all premiums and they keep the policy in force until maturity.
This is because the basic sum assured and bonuses allocated
at the time of purchase are guaranteed - they are ‘locked
in’ and together are often more than the initial purchase
price of the policy. In addition, the expenses incurred in the
early years of the endowment’s term have all been met
by the original policyholder
Secure Offshore Investment - Traded Endownments
Traded endowments are, therefore, popular as investments
in their latter years when most of the investment growth takes
place. They are also a potentially attractive investment for older
clients as the new TEP owner becomes the beneficiary and any restrictions
remain with the original life assured. Another important benefit
is the flexibility of TEPs in providing investors with a lump
sum tailored to their specific needs and at a price of their choice.
There are TEPs available to suit all pockets.
Secure Offshore Investment - Geared Investments
Geared investments in a portfolio of TEPs have been increasing
in popularity both in the UK and overseas. Essentially these are
TEPs purchased with the aid of a bank loan. Overseas and UK banks
are often willing to lend up to 90 per cent of the surrender value
of the TEPs, thus allowing the investor to maximise the potential
return on his investment by buying a larger number of policies.
The investor pays all costs and premiums for all additional policies
bought through the loan. This means that after paying the original
capital outlay all future policy premiums and all arrangement
and management fees are paid from the loan account. As policies
mature the loan is reduced until it is finally paid off. The investor
benefits from the maturity values of all remaining policies in
the portfolio.
Over the last few years’ several collective investments
have been launched in diversified TEPs portfolios. The Kleinwort
Endowment Policy investment trust was the first on the market,
and has since been followed by other similar products. These
have helped significantly to broaden the range of potential
investors. In addition, pension fund managers now represent
an important part of the overall investment in traded endowment
policies as they clearly understand the benefits of with-profits
endowments and the stability and security they bring to an investment
portfolio.
Secure Offshore Investment - Invest In TEPs
It is also possible to borrow to invest in TEPs against the security
of other assets, such as property or stocks, where the purchase
of a portfolio of TEPs, whether geared or not, can be used as
part of an overall portfolio of investments.
Another recent innovation in the TEPs market is the ability
to trade endowment policies online.
Launched last month, the TEP Exchange is an online supermarket
for buying and selling policies that is designed to speed up
the process. Currently, in order to trade TEPs, independent
financial advisers are required to contact market makers individually
- a process which means it can often take days to find the best
price. This can now be discovered in a matter of minutes over
the internet.
Secure Offshore Investment & Joanne Hindle
TEP Exchange marketing director Joanne Hindle said: “This
technology, combined with the financial services expertise, is
taking a 100-year old market and bringing it into the 21st century.”
It’s also been welcomed by Paul Sands, chief executive of
Surrenda-link, one of the UK’s largest policy purchasers,
who described the innovation as “a major step forward in
the expansion of the market.”
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