K
Kamal Sardana
Member
Hi Team, my doubts are as follows:
Q.1 What is the difference between Undistributed Surplus and Estate ? Are they both same thing ?
Q.2 Is Estate a part of Asset Shares or not ?
Q.3 Difference between "with-profits fund asset" and "asset shares of in-force business" ? [You can refer Page 16 of Ch 20(SA2-2022): RB could be said to be sustainable if the company could continue to pay current levels of RB:
by using up all its with-profits fund assets and giving no terminal bonus
by using only the asset shares of in-force business and giving no terminal bonus
by using the asset shares of in-force business and maintaining its target percentage of terminal bonus.]
Q.4 Tax Deductions in Asset Share Chapter: Page 10 of Chapter 19.(SA2-2022):
I am not able to this paragraph at all such as:
1. What is Net of Tax expenses?
2. What is Net of tax Investment return? and everything mentioned below!!
"For business taxed on an I-E basis, most companies use net of tax expenses and a net of tax investment return. A possible alternative would be to treat each policy on a stand-alone basis using gross income and gross expenses until income exceeds expenses. After that, net would be used. Allowance might be made for deferral of tax relief on acquisition expenses being spread over seven years. The stand-alone basis assumes that the policy’s expenses won’t attract tax relief until its own investment income exceeds its expenses. However, if the company has sufficient ‘I’ generated elsewhere, then in fact the company will receive tax relief on expenses immediately. If this isn’t credited to individual policy asset shares then it will accrue to the estate within the fund."
Q.5 based on Ques 4 above, I am not able to understand the question i.e. Practice Question - Q19.3 (SA2-2022):
A UK life insurance company is calculating the asset share of a 25-year with-profits endowment assurance policy. It is considering the following three different approaches to allowing for tax:
Gross i.e. ignore tax
Net i.e. net down ‘I’ and ‘E’ throughout the term
Stand-alone i.e. switch from gross to net when ‘I’ exceeds ‘E’.
Compare the value of the policy’s asset share using these approaches, considering separately the value of the asset share early on, mid term and later on.
Q.1 What is the difference between Undistributed Surplus and Estate ? Are they both same thing ?
Q.2 Is Estate a part of Asset Shares or not ?
Q.3 Difference between "with-profits fund asset" and "asset shares of in-force business" ? [You can refer Page 16 of Ch 20(SA2-2022): RB could be said to be sustainable if the company could continue to pay current levels of RB:
by using up all its with-profits fund assets and giving no terminal bonus
by using only the asset shares of in-force business and giving no terminal bonus
by using the asset shares of in-force business and maintaining its target percentage of terminal bonus.]
Q.4 Tax Deductions in Asset Share Chapter: Page 10 of Chapter 19.(SA2-2022):
I am not able to this paragraph at all such as:
1. What is Net of Tax expenses?
2. What is Net of tax Investment return? and everything mentioned below!!
"For business taxed on an I-E basis, most companies use net of tax expenses and a net of tax investment return. A possible alternative would be to treat each policy on a stand-alone basis using gross income and gross expenses until income exceeds expenses. After that, net would be used. Allowance might be made for deferral of tax relief on acquisition expenses being spread over seven years. The stand-alone basis assumes that the policy’s expenses won’t attract tax relief until its own investment income exceeds its expenses. However, if the company has sufficient ‘I’ generated elsewhere, then in fact the company will receive tax relief on expenses immediately. If this isn’t credited to individual policy asset shares then it will accrue to the estate within the fund."
Q.5 based on Ques 4 above, I am not able to understand the question i.e. Practice Question - Q19.3 (SA2-2022):
A UK life insurance company is calculating the asset share of a 25-year with-profits endowment assurance policy. It is considering the following three different approaches to allowing for tax:
Gross i.e. ignore tax
Net i.e. net down ‘I’ and ‘E’ throughout the term
Stand-alone i.e. switch from gross to net when ‘I’ exceeds ‘E’.
Compare the value of the policy’s asset share using these approaches, considering separately the value of the asset share early on, mid term and later on.