Unitised insurance funds or unit-linked insurance funds are a form of
collective investment
An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...
offered
life assurance
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...
policies.
An insurance company's contract may offer a choice of unit-linked funds to invest in. Insurers that offer these contracts are mainly found in the
UK and
British Isles
The British Isles are a group of islands in the North Atlantic Ocean off the north-western coast of continental Europe, consisting of the islands of Great Britain, Ireland, the Isle of Man, the Inner and Outer Hebrides, the Northern Isles, ...
offshore financial centre
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
"Offshore" does not refer ...
s. All types of life assurance and insurers pension plans, both single premium and regular premium policies offer these funds. They facilitate access to wide range and types of assets for different types of investors.
The range of fund choice for investment has grown significantly in recent years with the increased trend to provide unit-linked alternatives to popular
unit trust
A unit trust is a form of collective investment constituted under a trust deed.
A unit trust pools investors' money into a single fund, which is managed by a fund manager. Unit trusts offer access to a wide range of investments, and depending on ...
and
OEIC An open-ended investment company (abbreviated to OEIC, pron. ) or investment company with variable capital (abbreviated to ICVC) is a type of open-ended collective investment formed as a corporation under the Open-Ended Investment Company Regulati ...
funds styled as ''externally managed funds'' as opposed to the life assurance companies ''internally managed funds''. Typically the externally managed fund links have higher charges; this is tolerated as the expectation is for better returns.
Nature of funds
The funds are open-ended investments made available through life assurance companies. Unlike most collective investments, there is no independent body tasked with safeguarding the assets. The company may manage, promote and hold the assets on behalf of the policyholders. The policyholders have rights to the assets but do not own the units, nor are they readily redeemable.
This said, in practice life insurance companies tend to be well–regulated and depend on their reputation which ensures consumer confidence when investing.
See also
*
Unit Linked Insurance Plan
References
External links
Financial Conduct Authority (FCA)– regulates the conduct of
life assurance
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...
companies in the
UK.
{{Insurance
Investment funds