Former executive director of the Unit Trust Corporation (UTC) Clarry Benn anticipates that Clico and Hindu Credit Union (HCU) policyholders may convert their $75,000 payout into hard capital items. Benn said rather than put the money back into a financial institution, the policyholders can opt to build an apartment or small office, which can bring them some returns. "There is a school of thought, and I have heard it more than once, that rather than putting the payout into a financial institution which you may be unsure about, you can convert that into hard capital items such as buildings where they are assured they have an asset," said Benn. Over time, he said, the assets can yield some kind of return and would not deteriorate under normal conditions. "It is likely to appreciate over time."
Stating that the money the policyholders invested over the years was supposed to be used for a rainy day and retirement, Benn said many may not live to enjoy the 20-year payout outlined by Finance Minister Winston Dookeran in his 2010 budget. "Having done everything prudently, the older policyholders now find that they are on the receiving end. The thing about it, is that they are not likely to retrieve the bulk of their holdings as many would pass on before they reach the end of the 20-year period." Given the level of uncertainty, Benn said these policyholders may opt for money market type instruments of a shorter maturity which they can easily access. "The banks and the money markets funds will become a haven for these funds. But again one would be more interested in capital safety rather than rate of return," he explained.
Benn said policyholders between the ages of 30 to 40 who deposited $75,000 and less and were looking forward to a high interest rate over a short term would be faced with disappointment. Some, he said, will opt to buy Government bonds, which will go towards their life savings and portfolio of investments. "Basically, those policyholders who invested $75,000 and less did not lose anything except the interest and time. They would have had the best of all deals." Benn said what these policyholders will be looking for is quality in term of comfort level, as distinct from necessarily high rate of returns. "I suspect that they would be advised to place their resources pretty close to them, meaning to put their money on a short term investment, which may not be necessarily be yielding any high rate of returns." Benn said no matter how you look at it, the news will not be good. Benn said if the policyholders get 14 to 15 per cent in gross terms that would be reasonable.­