Whole of Life, or Endowment policies, as they were known, used to be offered in Australia up until about 5 years ago when the previous government changed regulations pertaining to the taxation of these types of products.

The main tax concession available with these policies were If no withdrawals are made in the first ten years you do not have to pay income tax on the investment gains of the plan. If withdrawals are made during the 8th or 9th year a tax rebate may be available. But on a sliding scale.

If you currently hold an ‘Endowment’ or ‘Whole of Life’ policy, you may find some answers in this AMP Fact Sheet for their old funds. But still the fact remains that you can’t apply for new policies anymore. One main reason would be that fund managers weren’t making enough money on them either. Fancy that.

If you have a Whole of Life policy, you may want to consider talking to someone about whether it is still suitable for you or not. These policies have two parts to them.

1) A Life Insurance component - A premium is paid for a small amount of life insurance in the fund.

2) A savings component - Part of the money you put in goes towards the savings portion of your policy.

For example, if you pay $50 month toward your policy and possibly $30 of that will go to pay for the life insurance. In the beginning it may only have been $5 or $10, but as you get older, the premiums increase an that eats into the savings component of your fund.

This is why I get so many people asking me why they only have a small amount of money to cash in at the end of the policy when they’ve been paying into it for over 10 or 20 years. Sometimes, the best option is to look at premiums the other companies are offering, (who also have better benefits that the original policy you may have) and put the savings component into super, your mortgage, or even a savings account.

PD