Before buying a second hand endowment policy your investment criteria should first be established. This includes the sum to be invested, the future premium requirements and the date for your investment to mature. There are also tax implications to be taken into consideration, so you may wish to purchase a number of endowment policies maturing in different tax years.

Once you have made your selection a 'Sales Contract' and an 'Absolute Deed of Assignment' are produced, transferring all rights and benefits to the new owner. The deed will be registered with the life office confirming you as the new owner and a solicitor will forward to you all the documents. The monthly premiums with then be collected via the method agreed, which will usually be direct debit.

The investment attraction for buyers:

• Guarantees: TEPs contain significant built-in guarantees defined in the contract.
• Return on Investment: TEPS can offer returns well above those which are obtainable from competing investments.
• Good Value: TEPs are normally sold at a discount to their intrinsic worth so they can be sold on at anytime in the future.
• Growth: TEPs attract maximum earnings as the commission and administrative costs have already been paid by the seller.
• Selection: TEPs can be bought from £1,000 upwards, with maturities matched to individual needs.

Possible reasons for buying a traded endowment policy:

• School fees planning
• Retirement planning
• Capital risk reduction without sacrificing performance
  
• Saving to pay off a mortgage early, or for the unexpected
  
• Investments with high collateral values which rise annually
  

It is essential that independent financial advice be taken before deciding to buy a second hand endowment policy.

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