A Guide To Life Insurance - The Unit-linked Pension Plan ....

 

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The Unit-linked Pension Plan...

The unit-linked pension plans have, like their conventional counterparts, developed considerable sophistication.

Almost all of each premium is invested in units in tax-exempt funds, usually parallel to the life insurance funds (property, managed, equity, fixed-interest securities). The planholder can decide into which of these funds to direct his premium in any year and also for a small charge switch his units from one fund to another.

Unlike the conventional plans, unit-linked schemes do not usually guarantee any amount of final pension.

The benefits available at retirement age are obtained by purchasing an annuity with the proceeds of the units accumulated, and their value depends on investment performance over the life of the plan. Clearly the unit price could be very different at one's chosen retirement age from that a few months earlier or later, and so the plans allow considerable flexibility as to when benefits may be taken.

The individual has to remember that with unit-linked schemes it may be very much to his advantage to defer taking the benefits, to allow the unit price to recover from a temporarily depressed level.

Some unit-linked plans have, however, introduced guarantees. Normally these involve a special fund (a non-unitised fixed-interest fund) which allows the company to guarantee a value at retirement age and hence an actual pension. Such guarantees are no different from the non-profit ones discussed earlier, and may be useful at ages close to retirement.


An Online Guide To Life Insurance - Further reading ....

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Read On: click here for The Unit-linked Plan At Maturity


The unit-linked plans involve charges expressed slightly differently from unit-linked life insurance policies.
The initial charge on units is normally 5% but may be higher, and the annual charge is between 1/2% and 1%.
Many plans, however, also involve the allocation of capital units in the first one, two or three years, embodying an extra management charge of 3% or more. As previously mentioned, this is not a once-for-all charge; it is an annual charge and means that 3% (or whatever)........ see: click here for The Unit-linked Plan At Maturity


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