Photo Credit: ifindkarma
Here is the elaboration from Wikipedia:”Traded endowment policies (TEPs) or second hand endowment policies (SHEPs) are traditional with-profits endowments that have been sold to a new owner part way through their term. The TEP market enables buyers (investors) to buy unwanted endowment policies for more than the surrender value offered by the insurance company. Investors will pay more than the surrender value because the policy has greater value if it is kept in force than if it is terminated early.
When a policy is sold, all beneficial rights on the policy are transferred to the new owner. The new owner takes on responsibility for future premium payments and collects the maturity value when the policy matures or the death benefit when the original life assured dies. Policyholders who sell their policies, no longer benefit from the life cover and should consider whether to take out alternative cover.
The TEP market deals exclusively with Traditional With Profits policies. The easiest way of determining whether an endowment policy is in this category is to check to see whether an it mentions units, indicating it is a Unitised With Profits or Unit Linked policy, if bonuses are in sterling and there is no mention of units then it is probably a traditional With Profits. The other types of policies – “Unit Linked” and “Unitised With Profits” have a performance factor which is dependent directly on current investment market conditions. These are not tradable as the guarantees on the policy are much lower and there is no gap between the surrender value and the market value.”
In an article by Mr Dennis Ng from HousingLoanSG.com, he reckoned “it is actually safer to invest in Traded Endowment than buying a Property in Singapore”
You can find out more from these links:
It is Safer to Invest in Traded Endowment than Buying a Property in Singapore
Investment with Steady Returns: UK Traded Endowment Policies
A write-up from MAS on TEPs and TLPs HERE.
2) When one purchases a TEP and take over the ownership, will he/she enjoy the sum assured stated in the policy if death happens to him/her?Nope, the insured remains the original person. You are the owner of the policy and enjoy the maturity value of the policy upon maturity.
3) Currently, only UK TEPs are available in Singapore, are there any other countries that offer as well?
I only trust UK TEPs because UK has very strong regulation and protection on Endowment policies. TEPs are highly regulated in UK to eliminate any risks of fraud. In the worst case scenario of the collapse of a UK Insurer, you as the investor is protected under UK Financial Services Compensation Scheme, which guarantee 90% of the Cash Value of the policy. Which means your maximum downside is only 10% of the Cash Value of the policy.
4) How do I go about it investing in a TEP? What is the typical process?
You buy from the UK Traded Endowment Market. The entire process is actually done by UK lawyer to ensure the whole process is legal and investors’ interests are protected, very similar to a property transaction.
5) What are the cost of a TEP? E.g. sales charges, commissions, or even yearly administration fees.
No commissions payable by investor. Any fees, including legal fees and commissions are borne by the seller of the policy (the original insured). No yearly administration fee. After you invested into a UK Traded Endowment policy, each year, you pay the annual premiums to UK Insurer directly.
6) Are there many types of TEPs to choose from besides years to maturity?
they are all Reversionary Endowment Policies. You can choose from as short as 4 years to maturity to as long as 20 years to maturity.
7) What is the estimated ROI in TEPs as compared to someone buying an endowment policy in Singapore?
Annual returns is 5% to 8%, compared to 3% to 4% for S$ Endowment plan.
If you are not convinced, you can refer to 12 Reasons Why TEPs are Attractive.You can invest in TEP in Singapore through TEP Pte Ltd. Find out more by calling 6883 2235 or email to them at info@TradedEndowment.com.
Share
{ 6 comments… read them below or add one }
Hi Alvin, like any product bought in a foreign currency, there will always be Exchange Risks. And in the case of this TEP, there is another possible risk of 10% loss. In my opinion, buying a product which only offers an upside of additional 2 – 4% with a comparable local product, doesn’t really equate to taking on the Exchange Risks. Talk to those aunties and uncles who got themselves burnt, investing in Foreign Currency deposits and you’ll know what I mean. If one is willing to take on such risks, then I think Land Banking could be a more profitable option. A client of mine has done very well, in it, for the last 7-9 years…and he has the documents to prove it.
James
http://futures-trading.blogspot.com
Thanks James for pointing out the risk. I believe it is important to layout all the risks that are inherent in every investment products so that all of us can make an informed decision to whether to take them or not. I welcome different point of views and definitely need people like you to contribute! Thanks once again.
As for land banking, I believe I will be covering shortly and maybe I can get your input as well? :)
Hey Alvin,
personally, as an Independent Financial Adviser, I strive to offer views from all angles. It’s no point trying to see an issue, or an investment product from one’s own perspective only. Having said that, it can be tough at times, due to one’s personal experience, or even biasness. So, it’s always good to take a step back, to see the broad picture, and list the facts, with the least emotions involved.
Unfortunately, I am not the best person to ask, about Land Banking but if there is anything that I can’t answer, there’s always my client, that I can go to, to find out…
Cheers!
James
http://futures-trading.blogspot.com
Hi Alvin
Did u ask Dennis NG what he gained from each transaction ? Is it as good as selling an insurance policy in SIngapore ? Who can the “customer” turn to if he need help later ? UK is too far away … what if Dennis’ company cease to exist ? what happen to the policy purchased ?
rgds
Sean
How much he is earning I am not sure. But like what you say, if he is taking as much as what an insurance agent is receiving, on the other hand he is providing a product with a higher potential return.
Every financial product has risk, even for a reputable insurance company can face danger of collapse. I am not the right person to comment what will happen to the policy if Dennis’s company folds up – it will probably be more appropriate to ask him if you are interested in the product and would like to understand more. However, I believe since the policy is recognized by law with the procedure being handled by lawyers, the policy payout and agreement will still stand with or without Dennis’s company.
Of course, when buying an investment product, it is best to read the contract terms and conditions carefully and clarify any doubts you have.
For the past 15 years I have worked in the TEP market here in the UK.
I now act as an independent introducer for other products as well as TEPS.
I am now able to view the whole market rather than obtaining policies from just one source (as I had to when working for one company).
With the experience that I have gained I consider myself knowledgeable in this niche market.
Should anyone be interested in looking to invest I can provide examples of policies which may be suitable.