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Check your policy is well suited to you.

THE second hand policy market has expanded rapidly since its commencement over 150 years ago.

There are now many companies who specialise in trading endowment policies; both buying and selling.

It is estimated that only one third of all endowment policies actually reach maturity, so the potential for the traded endowment market has never been greater.

Endowment policies are one of the most popular forms of investment in the UK, and are commonly bought to repay home loans at the end of a specified term or as a method of regular saving.

With profits endowments grow by the addition of bonuses and much of the growth can occur later on in the policy term and at maturity.

Some people find that they are unable to continue payments to their policy for one reason or another and can often get a higher price by selling the endowment, rather than surrendering it to the life office. Traded endowments are then sold via specialistdealers to investors hoping for an impressive terminal bonus, but how suitable are they for the over 50s?

Much depends on an individual's circumstances and their attitude to risk. Everybody would like an investment that produces spectacular returns with the minimum of risk, but unfortunately, the investment world just isn't like that! Let's take a look at the main points to consider:

Term to maturity: The amount of time left to run on the policy is a key factor for the over 50s. You have to be sure you will be able to keep paying the premiums.

Returns: Whatever age you are, the future returns from traded endowments are not guaranteed. Although past performance is not necessarily a guide to the future, it's as good a starting point as any.

Life cover: If the life assured dies, the policy will pay out the value (according to the life office) at that time, and this could be greater than the surrender value.

Tax: Pay-outs are made without deduction of tax. A lot depends on the tax position of the purchaser at the time of the maturity.

Before making any investment decision you should seek independent advice, as an Independent Financial Adviser (IFA) can help you through the choices available and do all the background research for you.
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Publication:Sunday Mercury (Birmingham, England)
Date:Mar 1, 1998
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