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FSCS - State of Orgin Print E-mail

TEP - 14 November 2013

What constitutes a British investment? Presumably I would need to be domicile in the UK to take advantage of a scheme which is effectively underwritten by the British Government?

Oddly the answer isn’t as cut and dried as you might think, in fact in some cases it has more to do with the origin of the investment, than the origin of the investor.

The FSCS was primarily put in place to protect British investors against intuitional bankruptcy. So it may come as a surprise to discover that overseas investors can also take advantage of the protection.

One of the elements covered by the FSCS are ‘with profit’ Endowments. A product which is all but obsolete in terms of the new business sector but protection still has to be maintained for the millions of policyholders left over from the ‘mortgage boom’ of the late eighties and early nineties.

Here comes the twist, although these ‘with profits’ are no longer available directly from the Life Offices they can be purchased by way of a secondary market known as the Traded Endowment Market, or TEP market for short.

The TEP market effectively enables these ‘with profit’ endowment policies to be bought and sold like commodities. A commodity which has the potential to outperform the interest rates currently on offer by banks and building societies, whilst offering a similar level of protection.

Buying a TEP

Buying a TEP as an investment is easier than you may imagine. Specialist companies such as 1st Policy Company Ltd in the UK or TEP PTE in Singapore, produce weekly TEP Stock lists. All TEPS have minimum guaranteed maturity values. These guarantees are protected by the FSCS to 90% with no upper limit. Furthermore because each policy is a separate contract, each policy is protected separately so unlike monies held on bank deposit, the upper limit of £85K does not apply.

In other words if your client happens to hold more than 85K on deposit with one bank or building society they are leaving themselves exposed to institutional risk. One way to avoid the 85K threshold trap might be to deposit your monies in different UK bank accounts but with interest rates being the way they are, TEPS provide an alternative outlet. An outlet which not only utilises the protection offered by the FSCS but also provides a real potential for growth,  with the average TEP returning more between 3% to 7%.

For further information on these matters for  a list of available TEP’s contact Paul Harrison at 1st Policy company Ltd on 0044 208 455 1111 or Jay Nasir at TEP Pte Singapore 0065 688 322 35

Whilst details of the FSCS compensation limits can be found at:

http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/

 
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