GOOD TIME FOR GUARANTEED ENDOWMENT POLICIES (Personal Finance
At the time of writing, certain Assurers are offering effective rates of approximately 13,27% per annum. At first glance this does not seem that attractive, but when one calculates that it translates to a pre-tax return of 24,13% for a person on a 45% marginal tax rate, it becomes a sound investment, especially considering that it is guaranteed and therefore immune to possible stockmarket downturns or interest rate declines over the next five years.
On maturity these polices allow for various options including the option to continue with the policy without paying additional commission costs. At this stage the capital lump sum is tax free, the growth having being taxed in the hands of the Assurer during the investment period at the rate of 30%. One option is to leave the policy in place and withdraw the annual growth out of the policy as a tax free income which can be very advantageous, particularly for retirement planning.
investors placing more and more of their funds into the unit trust market,
it could be wise to complement these portfolios with a certain amount
of low risk, guaranteed investment. Interested persons should act fairly
swiftly as the effective rates on these policies may decline fast with
falling interest rates. comment