Tep market maker Shepherds has moved into trading unitised with-profits policies. As the pool of con...
Tep market maker Shepherds has moved into trading unitised with-profits policies.
As the pool of conventional endowment policies begins to dry up, the Tep industry is moving to find other sources of policies to trade in.
Unitised with-profits have, over the past 10 years, largely taken over from sales of conventional with-profits policies. However, until now policyholders wanting to exit these policies have not been offered the selling option, according to Shepherds.
Roger Lawrence, actuarial director at Shepherds, said: "It has long been an anomaly of the market that unitised policyholders have not been able to benefit in the same way as conventional policyholders.
He said Shepherds has developed an actuarial system to deal with the complicated charging structures of unitised policies.
The improvement between selling and surrendering unitised with-profits policies is unlikely to be as great as conventional policies, which at Shepherds typically fetch 17% above surrender value, according to the group.
Lawrence said: "The value we pay may be similar on each policy type but, because the surrender value of unitised policies tends to be higher to start with, holders of these policies are unlikely to see such high uplifts.
The unitised policies will be sold to private portfolios and other collective investment vehicles in the same way as conventional policies.
Neville James expects to be trading and investing in unitised with-profits within a year.
Peter Mason, investment manager at Neville James, said: "It is a logical extension of our business. The availability of tradable conventional policies is going down and demand from people wanting to trade unitised with-profits policies is rising.
He said in Neville James' own collective investment portfolio of unitised with-profits fund would be invested in a single fund. The group already runs a Tep Oeic fund.
Mason added: "We will put the unitised with-profits in a different portfolio. All existing investment schemes are marketed on conventional policies so the unitised with-profits should be kept separate from these funds.
Beale Dobie said it hoped to move into the market within the next five years. David Beale, director at Beale Dobie, said: "If there is a differential between the surrender value and true market value then there is possibly a market for trading these.
He said there are a number of factors to consider, for example the market value adjusters that life officers can apply to policies, life office history and bonus rates. Beale said the lack of tradable policies entering the market was more of an immediate problem than the drying up of conventional policies.
Three years at Wells Fargo
Effective from 9 December 2019
One firm with permission suspensions left
Continuing the Architas education series for clients.
Needs to apply for authorisation