Unitized With Profits Asset Share

Discussion in 'SA2' started by Rajat gupta, Mar 4, 2022.

  1. Rajat gupta

    Rajat gupta Ton up Member

    Hi Everyone,

    Can somebody please explain why it is appropriate to use actual expenses for 90/10 business and product charges for 0/100 business while determining Unitized With Profits Asset Share?

    Regards,
    Rajat
     
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Hi

    By using product charges, then the difference between actual expenses and charges (actual vs expected) will be borne by the estate or outside the estate and so will be paid for by the shareholder, ie 0% of risk borne by policyholder and 100% by shareholder. Which is how the non-investment risks should be shared for a 0:100 fund.
    Whereas, if actual expenses are used, any difference in actual over expected expenses would result in lower asset shares and ultimately lower bonuses and lower shareholder transfers. In a 90:10 fund, this expense risk would be shared between policyholder and shareholder 90%, 10% respectively.
     
    1495_sc and Rajat gupta like this.

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