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Saturday, May 3, 2008

Smoothing or bunching

COMMENT POSTED IN MY BLOG

There is some confusion of this new scheme with "income smoothing" whereby the insurance company pays steady bonuses, regardless of its investment returns.This new bonus scheme is not income smoothing. It is the opposite. It is "income bunching". The policyholder's steady bonus stream is removed and a hefty terminal bonus is substituted.

Larry Haverkamp

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