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A point that must be noted is the effect of the final encashment of income bonds on age allowance. The age allowance is an extra personal allowance granted to those aged over 65. For the fiscal year 1978/79 a married couple (over 65) will be allowed personal allowances free of income tax of £2,075 (instead of the normal £1,535) provided that their taxable income does not exceed £4,000. (If it does, the extra allowance is reduced by £2 for every extra £3 of taxable income.)

The bulk of the income from guaranteed bonds is not taxable and therefore does not count towards the limit: thus if £10,000 is invested in a guaranteed income bond yielding 8% net, only the “excess” of 3%, i.e. £300 a year, is regarded as part of taxable income for age allowance income limit purposes. Income bonds are often, therefore, a more efficient source of income for the retired than, say, building societies, since in the latter case all the grossed-up equivalent of the net income is taken into account.

However, in the year of encashment of an income bond, there will be a gain (on the capital portion) which will be subject (normally) to higher rates of income tax and invest­ment income surcharge. For the purpose of these two taxes, the gain is “sliced” over the period for which the bond has been held, and normally this will mean that any tax payable is small except for very high rate taxpayers.

However, for the purposes of the age allowance income limit, no top slicing is allowed and the whole of the taxable gain is regarded as part of the income in that tax year. This will very often mean that age allowance is restricted in the year of encashment, which means the individual will pay more income tax. However, this tax liability in an encashment year should not be looked at in isolation but related to the tax savings in the previous years. Most investors will achieve an overall gain in net income from income bonds over the holding period.

The average acquisition cost of units is determined by market movements and a principle called pound-cost averaging applies. This means that, because a given premium buys more units when prices are low than when they are high, over a period the investor acquires more units at lower than at higher prices and therefore his average acquisition cost per unit will be below the average unit price over that period. Pound-cost averaging is simply a mathematical fact of life, and, though it is comforting to know that it is working on one’s behalf in any regular investment plan, it does not alter the fact that it is the difference between the average acquisition cost and the unit price on encashment that determines the profit one receives.

The final unit price is subject to the fluctuations of the market, and as we have seen in recent years these fluctua­tions can be large and sudden. For this reason the majority of unit-linked life insurance policies contain one of two options: either the investor may defer taking the policy proceeds for a year or more (i.e. the policy continues in force with no more premiums payable) or he may take the units his premiums have acquired instead of the cash value. Either way, the intention is to allow the investor to ride out any fall in market prices so that he may encash his units at a better price. The ability to defer taking the proceeds is the better option, since the sum paid out will still be the proceeds of a policy and thus free of tax, whereas if the investor takes the units as the policy proceeds then any increase in their value from that point on creates a gain liable to capital gains tax.

To return to the theme of investment management, it is today widely recognized that to better the average trend in prices in any investment sector by a consistent 1-2% p.a. is a considerable challenge for any fund manager. Of course, most funds do achieve short-term bursts of performance.

The disparity between the cost of protection and investment-oriented contracts mentioned will be reiterated. Since the vast proportion of the premiums on any participating, or even non-participating life insurance policy aimed at producing a capital sum will be devoted to investment rather than to providing life insurance coverage, the cost of a given sum assured for an endowment policy of a given term does not vary greatly according to age. For example, a with-profit life insurance endowment policy for a given sum assured over 15 years would cost the same at 30 as at 20, only 2 or 3% more at 40 and about 7% more at 50.

So long as you are in reasonable health, therefore, you will lose very little, in terms of premium rates, by delaying taking out an investment-oriented contract until you are older (though of course the longer the period of saving, the larger the return will be). However, if we look at protection by itself, the picture is completely different. A 45-year-old man will pay up to four times as much for a 10-year term assurance policy as a 30-year-old; and a man of 55 will pay up to three times what the 45-year-old pays. Another way of seeing the difference is to look at the relationship between whole life insurance premium rates (premiums are payable throughout life) and term assurance rates.

The 30-year-old man would pay about £90 a year for a £10,000 whole-life insurance policy. A 15-year term assurance with the same sum assured would cost him about £17 a year. For a man of 55, the cost of the whole-life insurance policy has more than trebled to just over £300. But the cost of the 15-year term assurance has multiplied tenfold to £170.

The conclusion, inevitably, is that pure protective life insurance is best bought young, when it is so cheap as to be insignificant (at least by comparison with what you have to pay later). The sharp rise in the mortality curve after 30 is reflected in a steep increase in insurance premium rates.

There are many types of life insurance available out there on the market, and with the advent of the internet it has made life insurance more accessible to a lot more people. Prevously you were restricted to your local broker and what contract they had available. You were not to know if this was the best one for you, you simply got what you were given.

With quote engines and such there is the possibility of searching the entire market with a click of a button, this means that you will get the best contract at the best possible prices.

There are two popular forms of life insurance, term life insurance also known as level life insurance and this means that the sum assured in the policy will remain the same throughout the policy term. You can also get mortgage or decreasing life insurance and this is designed to decrease alongside a mortgage or loan that is being repaid over a period of time.

You can match your life insurance to suit your needs.

Why is life insurance vital to possess? Possessing life insurance is fundamental in a number of ways. First of all, life insurance awards a cash lump sum which can be useful to ascertain a decent living and to overcome the various obstacles in life. While critical illness insurance gives a living benefit, life insurance offers a death benefit. One might say: what will I do with an insurance whose benefits I cannot enjoy? Well, it is not what most people who have life insurance think. Many individuals tend to buy life insurance to protect their family. So, in different words, the benefits will serve as protection for their family and not for themselves.

When you go out to buy life insurance, your insurers will look at some factors before deciding whether to give you cover or not. Most of the times insurers will consider your age, sex, whether you are a smoker or not and several other aspects. In case you smoke, your premium rate will almost automatically rise as you will be deemed as a high risk by your insurers. You must be wondering why. Smoking can cause lung cancer and heart attack, so your risks of passing away might be much elevated. That is why; you will have to pay higher premiums. You should know that life insurance will not give you the money just like that. They will take a close look at everything before they decide if you are eligible for cover or not.

Nonetheless, many people succeed to buy life insurance as there are products for almost anyone on the market nowadays. In fact, there are even life insurance schemes for people over the age of 50. It is therefore encouraging to see that if you want protection, you might be able to get it even if you are old.

There are a few options available for your premium when you decide to take life insurance . Although most of the life insurance only policies will only sell you a guaranteed premium. A guaranteed policy means that the premiums will remain the same for the duration of the contract and never change.

The reviewable ones that are available can change, these are often cheaper at the start of the plan, however they can get more expensive over time. This could transpire to be more expensive however at the end than taking a guaranteed premium

Well how is the policy reviewed you may ask ?  Well this is based upon a number of different factors, the first one being claims experience and the experience over the industy, early cancellation of plans in the industry, how much it has cost to reassure the polcies, tax or changes in legislation over the previous years, investment returns, if andy medical advances have effected things in the last few years and finally but not least the expectation of future claims.

The premium could either go up, down or stay the same depending on what circumstances have occured. So when deciding what policy to take this is an important decision to make, do your research and work out how much you can afford every month. Term and the difference between reviewable and guaranteed prices at the time will obviously be an influence on the final decision you make.

Life insurance and critical illness insurance are very different products. However they can be amalgamated into one comprensive policy that will give total peace of mind.

Life insurance is where an income or a fixed benefit will be paid out if the person covered in the policy dies within the policy term. With this type of policy you also normally get terminal illness insurance included, this is often confused with critical illness insurance but is very different. Terminal illness is when the policy will pay our prior to death if the policy holder is diagnosed with a terminal illness. This allows them chance to sort out any affairs prior to them passing away.

Critical illness is very different this is where a lump sum or an income will be paid out if the policy holder suffers from one of the specified critical illnesses set out in the policy documentation from the outset. There is a much higher chance of suffering from a critical illness opposed to dying thus much more chance of making a claim on this type of policy and critical illness insurance is normally much more expensive than life insurance.