Surrenda-link estimates that a potential £15m in commission could be unlocked in additional policies being traded through the Traded Endowment Policy Market.
Matthew Roche, Marketing Manager at Surrenda-link explains: “Selling a policy may yield a greater return than surrendering one, as much as 30 per cent more.
Despite this fact, many mid-term policies suitable for sale on the TEP market are still being surrendered to the life companies. This represents a loss to the TEP market, to IFAs in terms of commission and most importantly to the policyholders who should be entitled to the best return on their investment.
According to Surrenda-link’s own estimates, advisers could have lost out on £15 million in commission last year through people surrendering rather than selling their policies through an IFA (assuming average TEP purchase price and IFA commission of 3 per cent). With the introduction of PS 106 this loss could be turned into a gain.”
Roche continues, “The total market for traded endowment policies is worth an estimated £1bn a year. Approximately £500m of that is being sold on the secondary market. With the introduction of PS106 from the Financial Services Authority (FSA), anyone wishing to surrender a policy will be informed of the option to sell. With this increase in awareness if only 25 per cent of the available market take up this option it would result in an additional £125m policies coming onto the market.”
Surrenda-link believes that these new rules from the FSA will encourage the widespread use of the TEP market and benefit investors, making more policies available on the TEP market for investors to choose from. For investors, a diversified body of TEPs offer good returns and continue to grow at a rate of nearly double that of high street savings accounts.
