Known as the Endowment Release Plan (ERP), Surrenda-link will provide a cash lump sum to the policyholder equivalent to around 70 per cent of the sales value, with a further cash payment at maturity.
The key benefit of the ERP is that it means a policyholder can realise immediate funds, whilst still receiving a proportion of the maturity value.
In detail, the ERP will:
* Provide around 70 % of the surrender value now
* Enable policyholder to relinquish ownership of the policy whilst maintaining an investment interest
* Pay original policyholder a sum on maturity
* The policyholder has no more premiums to pay
* Stop policyholder losing out to low surrender values which may not represent the true value of their investment
This new product gives consumers the opportunity to relinquish all obligations to their endowment policy whilst retaining an entitlement to a proportion of the maturity value.
How it works:
* The Market Maker will hold and maintain the policy, and continue to pay the premiums until maturity.
* The policyholder is guaranteed to receive the retained investment portion.
* The life cover will continue to run on the policy and the policyholder will be able to have a retained interest of 30% of the life cover to maturity.
* The policyholder will retain an interest in any windfall payments or extraordinary Life Office payments which may arise, for example from the demutualisation of the Life Office or distribution of orphan assets
Paul Sands, Chief Executive of Surrenda-link explains: “Some policies are not attractive to buyers who are long-term investors and some policies only attract buying interest periodically. The ERP provides holders of these policies with an alternative to surrendering, therefore avoiding possible Market Value Reductions (MVR).”
Sands continues: “The piloting of ERP means that policyholders now have another option available to them, which provides them with money for their policy, whilst maintaining an investment interest in their policy until maturity. This means that the valuable differential between surrender and the asset value can be retained. Surrender values have drawn closer to “sales” value over the last few months so that in certain instances neither of these two options are particularly attractive. Now the policyholder has an alternative.”
The process of an ERP offer is very similar to trading the policy as a TEP, meaning no more work is involved for the IFA. The commission rate for each individual policy is set by the IFA themselves and all documentation is available in order to explain ERP to potential clients.
For further information log onto www.surrendalink.co.uk or free phone 0800 5977 888
