Permitted property: cash: held for speculative purposes
If cash is selected for speculative purposes then this will cause the policy to be aPPB. As with other property, the test in respect of cash is by reference to the terms ofthe policy. A policy that is not to be a PPB should therefore either specifically excludethe possibility of holding cash for speculative purposes or do so implicitly by listing inits terms only those purposes for which cash may be selected or held.
Only foreign currencies are cash on which a gain may be realised through theirdisposal. The question of a speculative gain from a holding of sterling by a policyholderresident in the UK cannot arise.
Provided the terms of a policy preclude, either implicitly or explicitly, speculativeinvestment in currency, the policy will not be considered to represent a PPB simplybecause it enables the policyholder to select a currency that is:
- one in which the policy is denominated
- of the country in which the policy holder is resident
- one in which income arises from property to which the policy benefits are linked - but only to the extent of that income
- one in which property, to which the policy was previously linked, was priced or sold - but only to the extent of the cash sale proceeds to which the policy is now linked
- held solely for the purpose of obtaining a higher rate of interest, for instance a foreign- currency deposit account not held for speculative purposes, or
- held with a view to purchasing property in that currency.
Foreign currency held with a view to purchase property
Where foreign currency is held with a view to purchasing property in that currency thepolicyholder would need to satisfy the insurer that cash is not being selected forspeculation, and so should be clear about plans for the use of the cash. If intendedpurchases of assets did not materialise that would not of itself indicate a speculativepurpose for the holding of foreign currency but might require explanation.
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