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Deferral of profits

  • Thread starter SpringbokSupporter
  • Start date
S

SpringbokSupporter

Member
Why does the conventional with-profits policies defer more profits than accumulating with-profits policies?
 
It comes down to the split between regular and terminal bonuses.

Benefits for accumualting with-profits contracts are said to be 'readily identifyable current benefits'. This being the case, more emphasis is placed on regular bonuses. Accumulating with profits regular bonuses are thus more volatile than conventional regular bonuses. (p/h probably expects something close to actual investment returns to be added).

Terminal bonuses are used to a lesser extent than for conventional with profits as less smoothing is required.

Hope that helps.
 
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