Legal & General has today (30 January) announced it will close its with-profits fund to new business with effect from 31 January 2015, as a direct result of a continued fall in new investments since the RDR came into force two years ago.
The firm said that there will be no change to how the fund is managed as a result of the closure and it would continue to allow investments for existing policyholders and schemes.
The fund is invested in a range of assets, including UK and overseas equities, fixed interest and commercial property, and it aims to maximise returns for its members subject to an appropriate degree of investment risk.
Investments will continue to be allowed into existing with-profits pensions, including new members to existing group personal pensions, and the fund also accepts switches into these plans where allowed.
The firm said that existing regular contributions to endowments can continue.
L&G will write to its customers to advise them of the closure as part of the bonus mailing, or by separate letter for pension customers by the end of May 2015.
Jackie Noakes, managing director of mature savings at Legal & General, said: “We have seen a continued fall in investments into our with-profits fund, especially since the inception of the Retail Distribution Review.
“As these new business levels can no longer be defined as substantial, we have taken the decision to change the regulatory status of our fund to ‘closed’ in accordance with the Conduct of Business Sourcebook.
“We will continue to deliver active investment management in the best interests of our with profits customers as you would expect from a leading with profits provider.
“By actively investing in a broad spread of assets we aim to continue to deliver steady growth to our with profits policyholders.”
In November last year, Mike Kipling, with-profits actuary at Friends Life, said when looking at with-profit performance that some funds have done very well over time and some very badly.
He said that even within a single with-profits fund, some types of policies may be better relative performers than others.
He said the best, mainly quite small funds, have outshone all or almost all unit-linked products, often aided by the distribution of inherited estate.
But others have underperformed significantly - and some had famously over-stretched themselves to the cost of clients.
At that time, Paul Turnbull, actuarial and capital director at Aviva, said many with-profits funds continue to be a stable investment, offering more steady returns than direct equity investment, but with the potential for better returns than cash over the long-term.
The best funds have also performed well against like-for-like alternatives such as managed funds, he added.
ruth.gillbe@ft.com
