Unit Linked Savings
A Unit linked savings plan is a life assurance policy to which the policyholder pays a regular premium usually monthly, which notionally buys units in one or more unit funds operated by the life company. The policyholder may encash these units at some stage in the future, to provide a capital sum to meet some financial need.
Purchasing units
As each regular premium is paid into the plan, it purchases units of the life company’s unit fund at the Offer price. As the number of units attaching to he plan increases so does the encashment vale of the pan therefore building up a capital sum.
Savings term
Most unit linked plans do not have a fixed savings term. Most plans are open ended- can encash the plan at any time. However, Life assurance savings plans are not suitable for short term savings and the normal recommended minimum savings term is usually 10 years. This is because of the charges deducted from the plan at the outset and the fact that the premiums are usually invested, through the unit fund, in stocks and shares which can fluctuate in value.
Encashment Value
The encashment value at any time is usually calculated as:
No of Units * Bid price
Life Cover
A unit linked savings plan issued by a life assurance company is a life assurance policy; it must provide some death benefit. I.e.
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A specified level of cover or
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The encashment value of the plan at the date of death
