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Bonuses
Reversionary Bonuses: bonuses are declared annually as cash values computed as percentages of the basic sum assured and of bonuses declared in previous years. Once granted, these bonuses are guaranteed, cannot be withdrawn and are also known as attaching bonuses. Special Bonuses: one-off bonuses, granted at the discretion of the life company and are also guaranteed. For example, if a friendly society converts to a public company they may grant such special bonuses to each policy in force, instead of issuing free shares in the new company. Terminal Bonuses: Most life companies currently grant an additional bonus at the end of the life of a policy. In essence this is a loyalty bonus designed to encourage the policy holders to keep the policies in force until the maturity date. The size of the terminal bonus is dependent upon the investment conditions prevailing at the time of maturity, as well as upon the investment performance of the life company. Although it can be a large part of the final sum paid out, it is not guaranteed. Bonuses issued by any life company are dependent upon its financial strength which, in turn, relies heavily on its investment performance. It is in the interests of the life companies to even out the vagaries of the investment environment, by declaring bonuses which are reasonably consistent. However, bonuses may be increased or decreased from year to year, thereby affecting the final value of the underlying policy. Glossary of Terms Acknowledgement of Assignment This confirms that the insurance company has noted the assignment. After receiving notice, the insurance company takes 2-4 weeks to process the information. It sometimes happens, therefore, that the buyer has to pay subsequent premiums even though the Acknowledgement of Assignment has not been received from the insurance company. Annual Bonus Declaration and Reversionary Bonus Balance Notification The policy balance, consisting of the sum assured, annual bonus and accrued annual bonuses, is notified in writing by the insurance company once a year. Asset Share Asset share is the estimated value of the accumulated premiums paid under a policy, together with attributable investment returns and operating profits, less expenses and mortality costs. Auctioneer An Auctioneer is a firm which sells policies by auction on behalf of policyholders seeking to realise cash from their policy. The Auctioneer's income is derived from commission charged to the seller. Contract Note The contract note confirms the purchaser's agreement to buy the policy offered, paying the purchase price and taking responsibility for all future premiums up to the maturity of the policy concerned. All rights and obligations of the endowment policy are transferred on the date of purchase. The date of delivery of the policy documents is irrelevant'. Current Accrued Bonuses Total of reversionary bonuses declared so far. This figure would normally include any special bonuses declared. Market Makers and auctioneers need to know the total bonuses given on the policy; this will be found on your latest bonus statement. If this cannot be found, life offices will usually provide the information to policyholders over the telephone. Date of Bonus Declaration This will be the date on the bonus declaration statement sent to you. (frequently it is 31 December of a particular year) Death benefit: The amount that will be paid out on the death of the life/lives assured. Deed of Absolute Assignment This is a legal assignment by deed, to either an individual or a number of buyers. Joint ownership is sometimes recommended as this may avoid inheritance tax procedures in the UK if a co-purchaser dies. The last surviving co-purchaser is entitled to everything. Assignment to a minor is permitted by some life offices (if the premiums are paid by a third party) although minors are not permitted to resell. Endowment A regular savings policy which is a combination of life cover and investment. Can either be bought as a savings plan or be used to pay off a mortgage. Formula Maturity Value The Formula Maturity Value (FMV) would be the value of a policy at maturity if the current rates of reversionary and terminal bonus for a policy of the same original term were to remain unaltered. Note This is most unlikely to happen, but the figure is usually calculated by Market Makers as part of their valuation procedures Investor An investor is a corporate body or individual who purchases a TEP for a capital sum, assumes responsibility for the payment of future premiums and is entitled to the proceeds of the policy on maturity and to the death benefit if the original policy holder dies before maturity. Key Features Document A Key Features document provides: general information explaining the nature of the product. specific information about a particular TEP Locked-In Value: The locked-in value of a policy is the aggregate of the sum assured and reversionary bonuses allotted to a policy. Market Maker A Market Maker is a company which makes a market in TEPs, using its capital or that of an associate company to finance the operation. Market Makers make their profit from the margin between buying and selling prices. Maturity Date Date the policy expires. Monthly / Annual Premiums: The amount paid on the policy each month or year. Notice of Absolute Assignment: Assignment to the new owner does not take effect with the insurance company unless notice is given. This is therefore notification of change of ownership of a policy. Paid up The premiums have been stopped but the policy still 'grows' and keeps running until maturity. Policyholder: A Policyholder is the current owner of a with-profits 'endowment' or 'whole-of-life' policy. Policy Number The number given to a policy by the originating Life Office. Pricing Discount Rate: Standard way of calculating the price of a policy for sale. It is the rate at which the Formula Maturity Value and future premiums are discounted to reach a price for a policy. Reversionary bonus: Annual bonus allocated to the policy. Once allocated, it cannot be taken away. Start Date The date that a policy started. Sum Assured An amount guaranteed to be paid out when the policy matures or on earlier (death) claim, providing that premiums have been paid in full. Surrender Value: The amount the Life Office would give you if you were to give up the policy. We need an up to date surrender value and this can be obtained from your Life Office. Surrender Value Quotation Date Date that the Surrender Value was given/sent to a policyholder. Terminal Bonus: The terminal bonus is a lump sum added to the policy on maturity; it is not declared until the policy matures. Traded Endowment Policy A Traded Endowment Policy (TEP) is a 'with-profits' policy which has been sold before maturity. Policies include both endowment and whole-of-life. Unit Linked Policies Premiums are usually invested as units in stock market funds. There are usually no guarantees and the value of the policy goes up and down in line with the performance of the particular fund. Unitised With-Profits Policies Premiums are used to buy units in the Life Company's 'With-Profits' fund. Companies operate funds in many different ways. Usually these contracts have lower guarantees than traditional with-profits policies. With-profits The policy gains from the investment profits of the Life Office's with-profits fund by earning bonuses each year and at maturity. |
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About TEPMarkets
tepmarkets.co.uk introduces policy holders to leading Traded Endowment Market Makers. tepmarkets.co.uk only receives a fee, as introducer only, on completion of transfer of endowment and this fee is from the purchasing market maker. |