Introduction

The modern With Profits Endowment Policy is a life assurance contract between and Insurance Company and a policyholder for a fixed term.

Endowment policies today are most commonly used to repay the capital sum on an interest-only mortgage or to provide a tax-free lump sum at a given maturity date.

Traded Endowment Policies (TEPs) are endowment policies that are bought and sold by policy holders, investors and market makers

Investments in Traded Endowment Policies (TEPs) have grown significantly in the last decade and the market is now worth about £500m per annum. More and more people are considering including TEPs in their Investment Portfolios.

Most policies are originally taken out for 25 years, but the majority of policy holders do not wait the full term: instead, for a variety of reasons, they surrender their policies back to the Insurance Company prior to the maturity date.

In many cases, the surrender value offered by the Insurance Company is far less than the full market value of the policy and as such investors are keen to buy traded endowment policies to form part of their investment portfolios.