Adviser Guides 1hr
Guide to With-Profits Investments
With-profits funds are a life company investment that offers growth, some life cover and possible cash bonuses in return for a customer’s lump sum payment.
These policies, which can be in the form of a fund, a bond or a pension, have been used to for long-term savings or retirement or to pay off a mortgage. Investors are assured of some protection from the vagaries in the stock market by a ‘smoothing’ process in the level of returns.
The possibility of a future lump sum in the form of an endowment or income is a key selling point for many customers.
Answers provided by Paul Fidell, senior investment business development manager at Prudential, and Kevin Arnott, with profits actuary at the Phoenix Group.
IN THIS GUIDE
With-profits funds are a life company pooled investment where customers’ premiums are invested in a mix of equity, bonds, property and cash.
With-profits funds offer some unique qualities that will be very attractive for some clients and are usually sold as a safe haven product.
There is a lack of transparency in how the bonus rates and investment mix are decided that will deter yet more customers.
With-profits will likely be most suitable for those with a longer-term investment horizon and relatively low risk appetite.
There are no hard and fast rules and a number of factors need to be considered before deciding whether to exit a with-profits investment.