Singapore Sling

TEP - 16 May 2013 

 The astonishing rise in the value of the Sing Dollar has resulted in Singaporeans literally slinging money at the UK property market. An article on Bloomberg: http://www.bloomberg.com/news/2013-02-28/singaporeans-turn-to-berkeley-s-london-property-on-currency-gain.html reported that Singaporeans snapped up more property in London than any other country amounting to 23% of total sales.

Why the UK? Well in part at least this has to be down to timing, specifically the remarkable buying power offered by trading the Sing Dollar against the pound. In February of this year the Sing Dollar hit its highest value against the pound since 1981.  Perhaps equally important is the matter of security.  Only a handful of countries have managed to retain a Standard & Poor’s rating of AAA, the United Kingdom being one of them.

Delve a little deeper and you’ll find that it’s not only UK property that has been turning the heads of Singaporeans. They have also developed a keen eye for UK insurance policies. Insurance policies is probably too broad a term, in fact it is one specific area which they have targeted, that of TEPS.

TEP’s stands for Traded Endowment policies and refer to a specific type of insurance policy which used to be available in the UK known as the ‘with profit’ endowment policy. Ordinarily to take out such a contract you would have to be a UK citizen and demonstrate insurable interest but here’s the twist, TEP’s can be traded to almost anyone providing they are able to satisfy International Money Laundering regulations.

Three overwhelming arguments for investing in TEP’s rather than Property are security, security and security. I say this because TEP’s are protected in three ways:

 

Three overwhelming arguments for investing in TEPís rather than Property are security, security and security. I say this because TEPís are protected in three ways: 1.Each and every TEP has a guaranteed maturity value. This is an attribute which is clearly absent from any form of property purchase. 2.The value of these policies are further protected by the FSCS (Financial Services Compensation Scheme). This is a government backed initiative which protects 90% of the value of these policies individually. More information can be found at: http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/ 3.Almost all the TEPís available on todayís market have been granted a rating of ĎAí and above by the ratings agency Standard & Poors. Of course you wonít have anything physical to show from your money other than a policy document, certainly nothing worth photographing. There again owning something physical means obvious drawbacks, realistically there are going to be ongoing repair bills and the possibility of escalating maintenance charges. Such is the popularity of TEPís with Singaporeans that companies such as TEP PTE have been established in Singapore to provide easier access to the product. They act as a knowledge centre and even help investors raise capital to purchase policies via equity home loans. In terms of performance, TEPís may also have a distinct advantage over property in that they are linked, in part at least, to UK equities. This does not affect their guarantees (guaranteed maturity values) but it does affect the future performance of the product. One only has to take a cursory glance at the FTSE 100 to see that it has risen 18% in less than 6 months fuelling speculation of an imminent increase to bonus rates which would truly provide the Ďicing on the cakeí for these investments. Further information and examples of TEPís can be found www.1stpolicy.co.uk or www.tradedendowment.com/