A Traded Endowment Policy is a conventional With Profits Endowment Policy where the original policy holder has, for whatever reason, decided to sell in mid term.  Selling an endowment policy almost always brings about a higher return than surrendering the policy.  Once the traded endowment policy has been purchased, the policy is then legally assigned to the new owner who then also takes on the responsibility for the continued payment of all future premiums.  TEP's therefore offer the opportunity for investors to acquire contracts where the original owner has met all the establishment costs.

The new owner takes over the entitlement to any bonuses that have already been earned and which, by the very mechanics of the bonus system, means that those bonuses are guaranteed.  They also benefit from any additional bonuses that may be paid from the date of acquisition - this means that the degree of guarantee will increase as future bonuses are added to the policy.

Future bonus rates cannot be guaranteed of course as they will depend upon events yet to happen and future investment returns. However, because of the fact that a Life Office "actuarially smoothes" the bonus rates on endowment contracts, this means that the contract itself should not suffer from short term fluctuations normally associated with direct stock market based investments.