3.1.3 Charges and Commissions
- Amount and frequency of contribution or involvement.
- Term of the contract.
- Ease of access or notice period required.
- Type of contract i.e. investment, savings, protection.
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Unit linked products generally have explicit charges built into
the contract and calculated as a percentage of the value of units.
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The exception to this rule is the unitised with profit fund which
generally allows the actuary to control the unit price in certain
circumstances to inhibit the withdrawal of funds buy use of a 'market
value adjuster'.
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With profits products have implicit charges, taken into account
in the calculation of bonuses.
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Deposit accounts and National Savings products also work on an
implicit charge basis.
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Shares and gilts generally have dealing charges calculated by a
combination of flat rate and percentage charges relative to the
scale of the purchase or sale.
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Commission payments are one of the reasons charges are incurred
on products, as they increase the cost of selling the product. Where
commission is paid on up-front indemnity terms in particular, the
cost is heavy, and will usually be funded by reduced allocation
of contribution over the first few years. Details can be found on
key features documents
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