Hi Forum,
I'm hoping someone can help me with this point of confusion:
Course notes and materials for SP2 comment that annuities 'Can be sold to secondary market in some jurisdictions'. I imagine that the factor here is regulation and the implication is that this is not usually allowed.
However couldn't this be done using a combination of fairly vanilla products?
eg. a company who wanted to offer this could offer:
-An interest only loan, that gives a lump sum on day one and charges regular interest payments (equal to the annuity payments) until repaid.
-A whole of life policy that can repay the loan on the death of the policyholder
This would effectively swap the regular payments for the lump sum.
For an even more standard portfolio, it seems like we could use a very long term repayment loan packaged with a decreasing term policy. Maybe the companies involved could arrange to settle payments between themselves rather than paying the annuity and collecting the premiums from the policyholder?
I guess the main difference here is that the customer is involved in 3 contracts (instead of 0 contracts if surrender is allowed), but surely many customers would be happy with this?