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free estate vs inherited estate - same or different?

Y

yogesh167

Member
Hi

Is there a difference between free estate or inherited estate?

Thanks in advance

Regards
Yogesh
 
Hi
The inherited estate is the expression used to describe surplus assets in the with-profits fund which has been built up from under-distribution to past generations of policyholders.
The free estate is the difference between the with-profit's realistic assets and liabilities (which includes PRE) which in something like a 90/10 fund would likely have been built up via under-distribution so, as noted in the glossary, in UK practice the estate may be referred to as the ‘free estate’ or ‘inherited estate’.
So for SA2, you could use either.
Hope this helps.
Thanks
Em
 
Thanks for the reply.

As far as my understanding, available capital (from EV perspective)= free surplus + required capital and estate = free surplus ?

Does estate includes capital as well? Also own funds means available capital, right?

Thanks in advance
 
Last edited by a moderator:
yogesh167 said:
Thanks for the reply.

As far as my understanding, available capital (from EV perspective)= free surplus + required capital and estate = free surplus ?

Does estate includes capital as well? Also own funds means available capital, right?

Thanks in advance
Click to expand...
Hi

Yes, that is right, if estate is defined as realistic assets minus realistic liabilities then it will include required capital, such as the SCR which is calculated based on prudent (not realistic) assumptions.

Thanks
Em
 
Yes, if estate is defined as the realistic value of assets less the realistic value of liabilities (as is usually the case) then estate = available capital on a realistic basis, since available capital is also defined as assets less liabilities.

Bear in mind though that there isn't a single universally recognised definition of 'estate' and also that it only relates to a with-profits fund.
 
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