An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death.
[1][2] These are long-term policies, often designed to repay a mortgage loan, with typical maturities between ten and thirty years within certain age limits.
There is an amount guaranteed to be paid out called the sum assured and this can be increased on the basis of investment performance through the addition of periodic (for example annual) bonuses.
A low cost endowment is a medley of: an endowment where an estimated future growth rate will meet a target amount and a decreasing life insurance element to ensure that the target amount will be paid out as a minimum if death occurs (or a critical illness is diagnosed if included).
The TEP market enables buyers (investors) to buy unwanted endowment policies for more than the surrender value offered by the insurance company.
The other types of policies - “Unit Linked” and “Unitised With Profits” have a performance factor which is dependent directly on current investment market conditions.
These policies had already become far less popular and less widely offered in the years preceding this reform, both due to their very high cost relative to the sum insured and the widespread availability to the general public (at that time) of many other guaranteed investments with considerably higher rates of return than those contemplated within the traditional endowment plan.