Why do Investors Invest in UK Traded Endowment?

TEPs may not sound exciting but for thinking investors they may be ideal vehicles for building capital to meet future financial needs or obligations at a fixed time in the future. They may be used to provide future lump sums tailored to specific needs. Popular uses - albeit not exclusive - include 18th or 21st birthdays school or university fees and general savings as part of a wider portfolio of investments.

The stable annual returns of 5% to 8% is about double the returns for Singapore Endowment Policies, which is quite attractive.

TEPs appeal is based on the fact that they are backed by the strength and proven performance of leading UK life assurance companies with exposure to a broad range of asset classes and in theory offer steady and stable growth prospects.

TEPs ideally suit investors who are looking for a combination of relative safety and security together with growth potential although due to their exposure to the performance of the equity market they may not get back the full value of their investment. Such investors are often wary of investing directly in stocks and shares or other equity-linked vehicles such as unit trusts investment trusts and OIECs. In most circumstances TEP investors can rest safe in the knowledge that they cannot lose any of their initial investment provided they continue to pay the remaining due premiums and keep the policy in force until its stated maturity date.

This is because the basic "sum assured" and annual bonuses allocated by the time of purchase are guaranteed - i.e. "locked in" and together are likely to be worth more than the initial purchase price. In addition the expenses incurred in the early years commission and other costs have been absorbed already by the original policyholder.

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