It says a lot about the state of this country’s finances when the people being punished most are those who have shown prudence with their own money and are being punished for the profligacy of others. Those who showed a degree of caution and helped prop up our ailing economy are now being “rewarded” with a measly 1.5% interest rate.
So what can savers do to minimise their risks and get decent returns above bank base rate? This of course is the investors’ nirvana (or even Holy Grail for some at present) but its possible that solutions exist if we look hard enough for them as I hope to show you below.
Recently I’ve touched on private markets and in particular using Private Finance Funds as part of a diversified portfolio which offer little or no correlation to traditional asset classes. Today I want to concentrate on another fund which I feel may be of interest to those with a more cautious attitude to risk: The EEA Life Settlement Fund.
What Is a Life Settlement?
A Life Settlement is the sale of a life insurance policy to a third party when the policy holder has an impaired life expectancy. The market is predominantly based on “whole life” policies sold by over 65s who may have a reduced life expectancy of between 3 and 15 years.
Whole life policies last a lifetime and can always be assigned to another individual. In exchange for a premium that exceeds the surrender value the purchaser becomes the new policy holder. He pays all future premiums and ultimately gets the full value of the policy on maturity i.e. death of the life assured.
The benefit to the life assured is that they get additional liquidity at a time when they may need extra finance to make their life more comfortable whilst the investor knows the purchase price and return right from the outset. This is, as you’ll appreciate, an unusual phenomenon in the world of investment – particularly in today’s climate.
Is It Ethical?
Whilst it may make many people uncomfortable that they should profit from another person’s death, many advisers are finding investors reaching a level of acceptability in this fund by simply putting themselves in the position of the seller. They realise that if they were in that same position and someone was willing to pay a lot more for your policy than the insurance company then it would go a long way to providing comfort and dignity in their final years.
A recent report by The Pension’s Institute reached the following conclusion:
“There would appear to be no particular ethical issues associated with investing in this asset class that distinguish it from well established pensions and life market investments that are also based on mortality projections, provided products and processes are fully transparent to all parties and provided the privacy of the policyholder is safeguarded.”
The investment objective of the EEA Settlement Fund is to provide a benchmark 8% annual net return to investors on a stable long-term basis, with the prospect of total target net returns of 9% to 10% per annum.
If you would like more information on this fund or on how simple it is to access it then drop me a line.
Until next time…
