With Profits  

Guide to with-profits

  • Get up to speed about the current state of the with-profits sector
  • Learn about the implications of asset allocation
  • To understand the smoothing process and allocation of bonuses
Guide to with-profits


With-profits funds have acquired a bad name over the past decade or so following the mortgage endowment mis-selling saga. This followed the sale of mortgage products based on with-profits funds, that promised to pay off one's mortgage and provide a nice bonus at the end of it.

For many people this worked, but the market got carried away and invested too heavily in equities.

Once the stock market turned, many investments turned sour and the products failed. A big part of the problem was the fact that the way the products were managed was opaque: the smoothing process, the way annual bonuses were paid, charges and even the value of a client's policy.

Also the application of Market Value Adjusters when the underlying assets did not perform in the way in which clients had initially been led to believe, led many to think they had nothing to offer.

But the advent of pension freedoms have given them new impetus, at the large scale end, and the likes of Prudential have adapted their funds to make them more transparent, by offering a unitised product and clear guidelines on what the anticipated growth rate is.

Also the friendly societies are active in promoting their with-profits funds, by saying how they allocate more profits to the final pot due to being mutual, and offering low cost, tax-free products.

With-profits funds are unlikely to match their 1980s and 1990s heyday, but they are not bound to be written off just yet.

This guide will look at how with-profits funds work and whether there is a future for them, as well as how insurance companies have found a new way to market with-profits. It also asks, what do advisers think of these products?

The guide is worth an indicative 60 minutes of CPD.

Contributors to this guide: Alistair Cunningham of Wingate Financial Planning; Nick Bamford of Informed Choice; Bruce Dodd of Tilney; Paul Fidell of Prudential; AKG; Scott Eason of Barnett Waddingham; Martin Shaw of the Assocation of Financial Mutuals; Mark Stone of Whitechurch Financial Consultants; Andrew Burke and Kevin Arnott of Phoenix Group; Sean McCann of NFU Mutual; Libbi Martin of Shepherds Friendly; Brian Murray of Royal London.

Melanie Tringham is deputy features editor of FTAdviser.com and Financial Adviser

In this guide


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Why did with-profits funds not achieve the bonuses they promised?

  2. Annual bonuses can always be deducted regardless. True or false?

  3. What is a frequent criticism of with-profits funds?

  4. According to the Barnett Waddingham report, what asset class did the best performing funds have the greatest exposure to in 2017?

  5. How has Prudential revamped with-profits funds for the current investment requirements?

  6. How are NFU Mutual treating MVRs?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Get up to speed about the current state of the with-profits sector
  • Learn about the implications of asset allocation
  • To understand the smoothing process and allocation of bonuses

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