CH9 Flashcards

1
Q

What are the three main factors in deciding which repayment vehicle to use for interest only?

A
  • age
  • ATR and view of future performance
  • available income + borrowing requirements
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2
Q

What is a Without profit endowment?

A

This type of policy provides guarantees that the mortgage will be paid off if the policyholder (no investment element):
- dies during the mortgage term; or
- survives for the full mortgage term.

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3
Q

What is a Full With Profits endowment?

A

Provides
* a capital repayment vehicle;
* life insurance for the term of the mortgage loan; and
* the prospect of a tax-free lump sum on maturity.
* basic sum assured = value of mortgage

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4
Q

What is a Low Cost With Profits endowment?

A

Same as full with profits but sum assured = % of value of mortgage

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5
Q

What is in the ABI’s code of practice (endowment reviews)?

A
  • initial reviews should be no later than the earlier of half the policy term, ten years from inception or maturity;
  • subsequent reviews at min every five years;
  • reviews in the last five years should be annual if there is any mortgage shortfall risk;
  • policy review assumptions must be provided on either two projections at rates current at the time or a reasonable rate; and
  • the current surrender value should be value to which project rates are applied.
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6
Q

Review letter options if endowment shortfall?

A
  • Increase monthly premiums.
  • Extend the term of the mortgage and the endowment plan.
  • Repay some of the mortgage with a lump sum.
  • Change part of the loan to capital repayment.
  • Wait and see
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7
Q

What are retirement interest-only mortgages?

A
  • Help with shortfall on interest only
  • Enable borrower to fund shortfall with mortgage repaid on death, LTC or selling property
  • Regulated as standard mortgages under MCOB rules
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8
Q

What are the rules of stakeholder pension plans?

A
  • Max charge 1-1.5%
  • Min contribution £20
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9
Q
A
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