Traded Endowment Back in demand as investors seek out stable returns amidst market downturn Print E-mail

one thing positive about UK Traded Endowment is that UK is "happily" keeping this investment to themselves. They are not trying to come to Asia or Singapore to market this product.

What does that tell you? It tells you that they already have sufficient demand back in UK and they do NOT really need or want to market to people in Asia or Singapore.

We had to literally approach them to almost "plead" with them to allow people in Singapore to invest in UK Traded Endowment.

Below is some latest news on UK Traded Endowment:

Traded endowment policies bounce back in favour
By Ellen Kelleher

Published: May 16 2008 18:39 | Last updated: May 16 2008 18:39

Buying traded endowment policies, or Teps, on the second-hand market is in fashion again as investors seek out stable returns amid the market downturn.

The advantage of buying Teps is that they reach maturity at a set date, which is useful, for example, if you need to pay school fees in a certain year. They also offer stable annualised returns of as much as seven to 10 per cent on your initial investment. Another perk is they can be included in your self-invested-personal pension.

When you buy a Tep, you are purchasing an endowment policy in the middle of its life cycle.

Most contracts – which usually have a fixed maturity date set at 10, 15 or 25 years – deliver a “sum assured” or a fixed amount either at the end of the contract, or when the original policyholder dies.

In addition, a yearly bonus, which depends on the performance of the with-profits funds in which they invest, is paid and, in most cases, a hefty “terminal” bonus can be awarded when the contract finishes as well.

In return, the new owners of the policy agree to pay the purchase price and any future premiums.

The Tep market is far more buoyant now than it was a decade or two ago.

In the 1990s, endowment policies came to prominence as long-term investment vehicles when many were sold to people as a means of paying off mortgages. But scores of investors who bought them found that markets did not perform as well as expected and left their policies with insufficient funds to pay off their mortgage.

Now, some assurers’ with-profits funds are performing quite well and the bonuses received by policyholders are much higher. “Investors can make a lot of money on terminal bonuses,” says Anne Looker, trading director at market maker PolicyPlus.

Last year, for example, Prudential paid out as much as 133 per cent of the “sum assured” as a policyholder’s terminal bonus.

And in recent months, there has been a surge in demand for policies underwritten by Aviva, Prudential and Legal & General as these assurers have agreed to distribute a portion of their “orphan assets” (money that has built up in with-profit funds) to policyholders.

“These additional bonuses will make policies more valuable,” says Brian Goldstein, chairman of the Association of the Policy Market Makers, a trade group for Tep marketmakers.

A number of marketmakers, which are regulated by the Financial Services Authority, can arrange a sale. Policies can also be sold at auction.

Policies with 25-year terms are the most popular kind as they allow investors to earn the highest bonuses – as they are often based on investment returns locked in over the last 10 to 15 years.

Buyers are not the only ones who stand to benefit in the Tep exchange market. For cash-strapped sellers, the attraction is that they should receive about 10 to 15 per cent more than the surrender value and no longer have to pay premiums.

If a person had taken out a 25-year endowment and 10 years into the life of the policy decided that they did not want it any more, they might get £20,000 as a surrender value from a life office. In general, the average that a policyholder might expect to receive by trading it instead is 15 per cent above the surrender value – so, in this case, it could be around £23,000. The seller is liable for capital gains tax on the profits.
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