using teps for mortgages with traded endowments for house buying tep loans, endowment mortgages using teps
using teps for mortgages using secondhand endowments for house buying loans, teps for endowment mortgages

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Using traded endowments for mortgage repayment second hand endowment mortgages using teps for house purchase
 
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TEPs for mortgages.

Assuming you have decided that some forms of endowment savings plan should accompany your repayment provision. The following should be considered before purchasing endowments. These issues should be discussed with your Financial Adviser.

 
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Purchased TEPs are legally assigned to new owners who pay the purchase price and take over the payment of future premiums. The life assurance cover remains on the original life/lives assured, but all policy benefits on maturity or, an earlier life assurance payout, are the property of the new owner.

As TEPs are purchased mid-term the policy already has a guaranteed value made up of the 'Basic Sum Assured' and 'Bonuses Attaching' and the initial charges have all been paid by the original policyholder.

The Basic Sum Assured remains constant throughout the term of the policy and is paid on maturity or earlier if the original life assured dies. In addition bonuses are added to the policy every year and once added they cannot be reduced or taken away. The existing annual (or reversionary) bonuses together with the basic sum assured when the policy is purchased constitute the guaranteed value which is often higher than the purchase price of the TEP, meaning that, provided the policy is kept through to maturity, the new purchaser cannot suffer a financial loss.

On maturity (or earlier death of the original life assured), normally, a Terminal Bonus is paid in addition to the basic sum assured and existing reversionary bonuses. Terminal bonuses can be very substantial, and quite often make up more than 50% of the total maturity value, particularly on longer-term policies.

In summary TEPs are:

Low Risk - A significant proportion of the value of the policy is 'locked-in' through the basic sum assured and attaching bonuses, making TEPs a more secure form of investment than others such as equities or property which provide no guarantees. Inflation Resistant - The Life Office's investment exposure to equities and property within the with-profit fund helps offset the effects of inflation.

Access to Investment Management Expertise - Investors in TEPs are capitalising on the Life Office's investment expertise accumulated over many years.

Smoothing - Conventional with-profit policies benefit from the 'smoothing' process that has always been one of the main attractions of the 'with-profit' principle. Each year bonuses are declared and the Life Office actuaries adjust the levels of bonus to take account of the fluctuating investment returns. In determining bonus rates, some of the investment profits achieved during good economic times are held in reserve to help maintain bonus levels during times of economic weakness. The result for policyholders is that, over the life of a policy, maturity payouts reflect the returns achieved on the underlying investments within the with-profits fund, despite short-term fluctuations in investment conditions.

Flexibility - TEPs are very flexible. Policies can be selected with a wide range of maturity dates to suit an investor's specific requirements. Investors are not tied-in as policies can normally be re-traded at any time.

Competitive Returns - Because the initial set-up costs have already been paid by the original policyholder, policies can sometimes be acquired at a discount to the underlying guaranteed value, enhancing the overall rate of return to the investor. Currently rates of return, which are all based on the current levels of bonus* for the particular insurance company, vary between 8.5% and 14% p.a., depending on the remaining term, and with careful planning it is often possible to achieve these returns net of tax.

Windfalls - In addition to attractive low risk returns there is sometimes the possibility of additional benefits from demutualisation payments from some Life Offices and also 'orphan asset distributions'. Sometimes referred to us Carpetbagging or "action by carpetbaggers".

* Levels of annual and terminal bonuses are not guaranteed and can go down as well as up. Past performance is no guarantee of future performance. TEPs are normally medium to long-term investments and if surrendered or re-traded in the early years it is possible for a loss to be made.




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Life assurance latest : Prudential, Resolution, RSA, Aviva, Gartmore

17/08/2010 - Company Reports, Endowments - 0 Comments - 440 words


Insurance firm Resolution intends to continue on the acquisition trail amonst insurance and life assurance companies and indicated that it hopes to add further businesses to its portfolio by the end of 2011.

Resolution bought the AXA UK life assurance business in June for £2.75bn and Friends Provident last year for £1.9bn and indicated that it would like add an asset management capability to its portfolio.

Resolution reported an operating profit of £203m after a £7m loss a year ago as new business profits jumped 153% at Friends Provident. Shareholder cash resources remained around £605m from £510m at the end of 2009.

Resolution added “the results reflect strong performances at Friends Provident International and Lombard while the UK continued to face difficulties, notably in the UK individual protection market. The UK results serve to reinforce the case for consolidation.”

Meanwhile, fund manager Gartmore have reported a 146% improvement in interim earnings before interest, tax, depreciation and amortisation although net sales came in below expectations.

Reflecting stock market investor dash for safety during the credit crunch Gartmore indicated that assets under management at end June were down at £19.9bn from £22.2bn previously. Gartmore earnings before deductions were £38.8m in first half, up from £15.8m at the interim stage of 2009.

Chief executive officer, Jeffrey Meyer added “We are focused on regaining momentum and believe we are attractively positioned to benefit from the continuing demand for absolute return products and the general growth potential of our UK Retail business." The group did not declare a dividend.

After Aviva rejected a £5bn bid interest from RSA last week, in companies general insurance businesses in the UK, Ireland and Canada. RSA has again made it clear that it believes a tie-up would make “strong strategic sense”.

Aviva, previously Norwich Union remains opposed to disinvesting its general and life insurance units and indicated that "highest value to shareholders will be delivered by retaining these businesses within the group”.

Pru chief executive Tidjane Thiam and chairman Harvey McGrath have thus far survived shareholders dissatisfaction after Prudential failed bid for AIG Asian Businesses - AIA cost company £380m in fees.

The Pru reported last week that Asia was a driving force behind a big increase in first half profit as the giant life assurance company remains confident of momentum being sustained for the rest of 2010.

Pru's operating profit before tax on European Embedded Value EEV basis rose 34% to £1.68bn in the six months to end June as new business profit came in 27% up at £892m and IFRS operating profit was 41% to £968m.



Latest life assurance company reports : Legal & General, Aviva, RSA Insurance Group

05/08/2010 - Company Reports, Endowments - 2 Comments - 534 words


UK second-biggest insurer Aviva has beaten analysts expectations reporting that first-half profit rose 21 percent as the life assurer indicated a consumer return to long-term savings products.

Operating profit rose to £1.27bn beating expectation of £1.17bn as net income rose to £1.08bn from £675mn a year earlier. Chief Executive Officer Andrew Moss added that Aviva “remains alert to the macroeconomic environment and risks in financial markets.”

Aviva indicated that it is increasing sales of life and pension products in Europe and following its main competitors Legal & General Group and Standard Life, selling products with fewer guarantees in an effort to reduce the amount of reserve capital.

Aviva also confirmed that it is renewing its strategic partnership with Royal Bank of Scotland RBS in a new distribution agreement with Aviva where RBS’s distribution network will sell Aviva protection and selective pension products.

RSA Insurance Group have also reported today a ‘resilient’ interim performance against a difficult first half for the insurance industry as profit before tax came in virtually unchanged at £302m from £301m last year.

Insurance industry sales quotient, net written premiums were reported up 9% at £3.80bn from £3.49bn in a comparable period in the first half of 2009 while RSA's combined operating ratio also improved to 94.8% from 93.5%.

The interim dividend was increased by 7% to 3.12p from 2.92p a year ago as Andy Haste, chief executive officer of RSA commented that “As it stands today, we continue to expect to achieve a combined operating ratio of around 95% for the full year... we expect the UK to remain in positive territory for the remainder of 2010 with Emerging Markets to return to double digit growth in 2011.”

Life assurance giant Legal & General LGEN yesterday reported interim figures ahead of expectations despite profit coming £589m in the first half of 2010 but down from £656m previously reported in a comparable period.

The city will react well to the news since Panmure Gordon had a figure of £572m at the top of the range of its market forecast. L&G also indicated that it cash on account at the end of June at £3.3bn, presently ahead of the life insurers regulatory capital requirements. Company also increased the half year dividend to 1.33p from 1.11p.

Legal & General chief executive Tim Breedon added “We remain on track to generate at least £600m of net cash in 2010... ee are optimistic about growth prospects in UK savings and annuities, though there is little evidence of recovery in the UK housing market.”

Meanwhile, there is sign of life back in the TEP market. For those that wish to redeem the value an endowment policy early, it is best to seek a quote from traded endowment brokers who can offer improvement over the life policy surrender value.

The market has recently been supressed with margins squeezed by the low interest environment of the last 18 months. However, TEP's or traded endowment policy surrender values appear to be back on the increase after experiencing a couple of years of stagnation, according to leading TEP brokers.

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Mortgage holders cheered as margins improve in traded endowment market

24/06/2010 - Endowments - 0 Comments - 257 words


Traded Endowment Policies : There exists a way to sell second hand with-profits life assurance policies in which traded endowment brokers find best deals from purchasing market makers.

The point is that the redemption value of old endowment policies mid-term is usually below expectation whilst there are investors who wish to buy old policies which can be transferred between holders and kept running under new ownership until maturity.

Life policy holders have an option to trade policies in before the end of the contract and the policy holders can get improved offers for the policy they hold via competitive bids from the TEP brokers - traded endowment brokers.

This facility of use to home buyers and sellers who need to change their mortgage as they sell and rebuy new homes.

The market has recently been supressed with margins squeezed by the low interest environment of the last 18 months. Brokers have been unable to offer enough margin to warrant trades taking place.

However, TEP's or traded endowment policy surrender values appear to be back on the increase after experiencing a couple of years of stagnation, according to leading TEP brokers.

Now is the time again to try to get increased value your old endowment. The worst you can do with an old policy is usual to simply surrender it back to the original life company to obtain redemption value. But thats what the TEP brokers can do for you - to evaluate your policy and make an improved offer.

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