Many, although not all, of the market makers produce a “risk analysis” or “sensitivity table” for each individual policy that is to be traded. These tables shows the pricing discount rate (PDR) for each policy, assuming the current annual and terminal bonus structure of that insurance company is maintained. These table also demonstrate how the effect of any future changes, either positive or negative in those bonus rates, and their interrelationship with each other, will effect the PDR of each policy. When looking at these tables it is often the case that, even allowing for a reduction in bonuses, this projected yield can still remain attractive, especially when compared to current deposit based savings. It is this element that provides the measure of security, in that even if rates fall, there is still a good return to be had. In some cases the sum assured plus bonuses already paid can equal or exceed not only the purchase price but also the premiums yet to be paid in thereby providing a guarantee that the total outlay will be returned at maturity. It is these two key aspects that ensure that TEP’s are, quite rightly, perceived to be at the lower risk of the risk spectrum. Typically a 10% reduction in bonus rates would effect the yield on a TEP by 0.7% per annum - quite an attractive proposition!