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In either of these cases, each unit linked is tied to a series of assets in which the insurance company invests (on the participant's orders) depending on the insurance holder's tastes. In this way, the titleholder can alter his strategy (from fixed-rate assets to funds) without losing his investment and without generating capital gains tax. This tax advantage is one of the most attractive aspects of Unit Linked funds. Officially it is the insurance company that buys and sells the shares and not the titleholder.

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Unit Linked funds are offered by financial firms that have insurance and fund-management companies within their overall set-up. It is also worth remembering that part of the investment pays the premiums of a real life insurance policy.

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The performance of this type of investment is well treated by the taxman, as it is regarded as capital yield and, as such, is subject to an 18% deduction. The performance of such funds varies depending on the length of the investment, and the older the investment the less taxes will be deducted. Hence, a two-year plan will reduce the yield by 30%, meaning that 70% of the profit will be subject to duty. In plans of five or more years, the yields will be reduced by 65% and only 35% of the profit will be taxed. Finally, the funds that are over eight years old will be reduced by 75% in terms of yields with duty to be paid on the remaining 25% of profits.

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The taxman's benevolent attitude to Unit Linked insurance is the positive side of the equation. The negative is the lower profits obtained by these shares compared to conventional funds, as you sign up for life insurance for a fixed term (from three to eight years). Also, modifications of the investments are limited, averaging 4-6 changes a year.

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The participants in this type of life insurance tend to look into all the different types of investment possibilities open to them to find out which type of fund works best for them and act accordingly. To many savers this type of share investment reminds them
of investment funds or variable rate investments (market shares) in both attractiveness and dynamism.

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In terms of charges related to Unit Link funds, three costs should be kept in mind: the administrative and commercial cost of setting up of the life insurance, the commissions related to the savings investment funds and the portfolio fund management charges.

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