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Research shows take up of unit-linked set to grow

EUROPE- The use of unit-linked investments in pensions and insurance products in Europe is expected to grow, according to research by Cerulli Associates. Worsening demographic trends and corporate scandals have put pressure on Europe’s pay-as-you-go system, pushing alternatives, such as unit linking, to the fore, says Cerulli’s report.

With unit-linked products, it is the policyholder – not the provider – that assumes the risk, which, says Stephen Irving, editor of the report, is encouraging sponsoring employers to offer the product to employees.

“With the transfer of liabilities and investment obligations to the individual policyholder, insurers can insulate themselves to a degree from stock market fluctuations,” says the report.

Pension systems in countries such as Sweden, Germany, and the UK are already unit-linked-oriented, according to the report:

“Sweden’s privatised pension system is often described by some as the largest unit-linked policy…In the UK, stakeholder pensions typically take the form of unit-linked vehicles. ..German pension reform is also providing a fillip to unit-linked investments. Unit-linked products are heavily and aggressively promoted by IFAs in Germany.”

Says Irving: “the pension reforms taking place in Europe at the moment are leading to greater interest in unit-linked products. Especially in Europe, investors are more accustomed to insurance-based products, and unit trusts provide a gentle transition to slightly higher risk.”

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