With the market-linked option, the returns on your investment portfolio fluctuate with market conditions. The problem with an added feature such as life cover is that it increases costs, meaning more of your premium is going towards paying for the life cover and less is actually invested to generate returns. Van den Bergh looks at why you should consider investing in an endowment policy. The advantages Endowment policies are tax-effective for high income earners. The trade-off for this, however, is that the portfolio may be more conservative and therefore may produce less exciting returns.
Endowments are particularly popular with retirees because the returns are tax-free.
Once the endowment reaches maturity you can elect to cash it in or leave the policy running and withdraw tax-free amounts. However, you should be careful your withdrawals are not seen as being regular income flow, as the Receiver could then tax you. This means that as you get closer to retirement age you can swop into a less agressive, or more conservative portfolio. There is a second-hand market in endowment policies, which means you are able to sell your policy for a greater value than you would be able to surrender it for. This means that within 21 days of buying the policy, you are allowed to change your mind without paying any penalties.