The traded endowment market is expected to receive a major boost in September when FSA rules on client advice.
Under policy statement 106, endowment policyholders seeking information on surrendering a policy will be made aware of the option to sell it from September 1. TEP outfit Surrenda-link estimates that a potential £15m in commission could be unlocked in additional policies being traded through the TEP Market.
Matthew Roche, marketing manager at Surrenda-link says: “Selling a policy may yield a greater return than surrendering one, as much as 30% more. Despite this fact, many mid-term policies suitable for sale on the TEP market are still being surrendered to the life companies.”
“This represents a loss to the TEP market, to IFAs in terms of commission and most importantly to the policyholders who should be entitled to the best return on their investment.”
The total market for traded endowment policies is worth an estimated £1bn a year, with approximately £500m sold on the secondary market.
Roche adds: “With the introduction of PS106 from the Financial Services Authority (FSA), anyone wishing to surrender a policy will be informed of the option to sell. With this increase in awareness if only 25% of the available market take up this option it would result in an additional £125m policies coming onto the market.”