Life Assurance based Investments Flashcards
What are the 2 types of price system for With Profit funds?
Fixed - Unit price fixed, bonus adds additional units
Variable - Unit price increased by bonuses
What are the advantages of With Profits?
Bonusses declared annually in advance
May have terminal bonus
Bonuses not directly linked to investment performance
Most outstripped inflation in last 10 years
Exposure to equity market for risk averse investors without fluctuations in value
What are the disadvantaged of With profits?
MVR
Actuarial judgement of returns - subjective
Lack of transparency
Failing reversionary bonuses
What are the qualifying policy rules (UK Life Assurance policies) and what difference does this make to tax?
Min 10 year term
Regular premiums at least annually
Run for lower of 10 year or 3/4 of term
Life cover at least 3/4 of premims payable over term or age 75
Premiums can’t increase by more than 100%
Premiums in year can’t be more than 12.5% of total premiums
What is the Free Asset Ratio?
Financial strength of the company (life office)
% of assets surplus to liabilities
Stronger reserves = more likely to pay future bonuses
