Pauline is contributing €200 per month to a unit-linked savings plan investing in a Managed Fund. The number of units allocated to the plan each month is different. This is because

• A. Exit tax is deducted from the plan value in some months but not in others.
• B. The life company changes the Bid/Offer spread from month to month.
• C. The unit price fluctuates from month to month.
• D. The number of investors in that Fund fluctuates from month to month.

Answer: (C)

In a unit-linked savings plan, each monthly contribution buys units at the current unit price (the fund’s price per unit). The number of units Pauline gets is her €200 divided by that price. If the unit price is €2, she buys 100 units; if the price rises to €4, she buys only 50 units. So even with the same €200 every month, the number of units allocated fluctuates as the unit price moves. Over time, the value of Pauline’s holding depends on how many units she owns and how the unit price changes.

Exit tax affects value when money is withdrawn, not how many units are purchased each month. A bid/offer spread can influence the price, but the fundamental cause of varying unit allocation is the month-to-month fluctuation of the unit price. The total number of investors doesn’t determine how many units Pauline gets in her own monthly purchase.