How do unit linked funds work?
What is a unit linked fund?
A unit linked fund is an investment fund that is divided into units, each representing an equal share of the fund. The value, or price, of the units depends on the value of the underlying of the investment fund. When policyholders put money into the investment, they buy units from the company. When policyholders withdraw money from the fund, they sell their units back to the company.
Some of our policies have two types of units, and , as may be shown on your Annual Statement. Each unit type has its own value. Your policy value comes from adding together the value of both the Capital and Accumulation units.
The underlying assets are the investments that determine the value of the units. They may include shares, bonds, property, futures and cash. The fund may also invest in collective investment schemes (such as unit trusts and Open Ended Investment Companies (OEICs)). The underlying assets are mainly managed by external investment managers; the mix of assets in any one fund will be based on investment guidelines for that fund.
How are the units calculated?
The price of the units depends on the market value of the underlying of the fund.
Are the buying and selling prices of the units the same?
Policyholders buy units (invest) at the offer price and sell them back to the company (encash them) at the bid price. It is normal for the offer price to be higher than the bid price. This difference is called the , and is 5% for most funds.
How frequently are unit prices calculated?
Unit prices are calculated daily, excluding weekends and public holiday.
What happens in extreme market conditions?
The company may freeze the price of units or suspend buying and selling of units if the markets experience excessive levels of volatility. The last time this occurred for funds held by Countrywide Assured was after the attacks on the World Trade Center in New York on 11th September 2001.
What charges are applied to a policy?
There is a variety of charges applied to the funds. You can find out more here.
How does tax affect the investment?
UK Life funds
Income and capital gains tax are payable and the daily fund price includes an estimate to cover this liability.
UK Pension funds
Pension policies investing in UK pension funds are not subject to tax.
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