TEP trader Surrenda-link says that traded endowment policies remain an attractive investment for those looking for higher than average growth, coupled with lower than average risk.
The company claims that investors can carry on making gains even if equity markets continue to fall or even if policy bonus rates are cut again this year, as has already been announced by certain life companies. The guaranteed value of a TEP often exceeds its purchase price which translates into a low risk investment, with above average growth, provided all premiums are paid to maturity.
In the light of the FSA's decision to ensure life offices make policyholders aware of the option to sell their policies, which came into effect in September 2002, more policies are now available for investors to choose from. Investors can purchase TEPs at historically low price levels.
Matthew Roche, marketing manager for Surrenda-link, says: “In my view, with-profits funds are now at, or close to, their floor. If they buy now, the growth potential would be a very attractive proposition for medium- to long-term investors. The sum assured plus the accrued bonuses of TEPs are locked in and cannot be taken away.”
Recent FSA research found that 84 % of consumers said their policy was expected to reach its target maturity value, or if there was a shortfall, it would present them with little or no financial difficulty. Over 20% of those with policies said it was no longer or never had been used to pay off a mortgage.