Hi, can you kindly explain this point in Practice Question solution for 16.2: "Does the charging structure lead to good value for money for the policyholder? Probably not, due to the cost of the guarantees and not brilliant capital efficiency."
Hi Kimiko This contract guarantees the charges and recovers the initial expenses from charges later in the term of the contract. Both of these factors increase the capital required. A higher cost of capital leads to higher charges for the customer and so poor value for money. Best wishes Mark