With-profits investment

Investing your money in our With-Profit Fund could be a good way of helping it grow. Here, you can find out exactly what with-profits investments are and how they work. So you’ll have the information you need to decide whether a with-profits investment is right for you.

Please remember, there’s a risk that the value of your investment could go down rather than up, and you may not get back the amount you invested. Although the fund has no fixed term, you should be prepared to invest for at least 5 to 10 years.

You can invest in our With-Profit Fund through an investment bond, a pension plan or an annuity.

The basics

Suggested length of investment: at least 5-10 years or more
Level of risk: Low to medium

Investment in our With-Profit Fund offers the potential for returns that are higher than those received from a bank or building society average savings account. You should be prepared to invest for the medium to long term (at least 5 to 10 years).

There is a little more risk involved, though. Whilst you can potentially benefit from higher returns, there's a risk that the value of any investment you make could go down rather than up, and you may not get back the amount you invested. It’s also worth bearing in mind that savings accounts come with a smaller risk of losing your money than with-profits investments, any interest you earn is guaranteed, and it’s easier to access your money through them.

Most people invest in with-profits funds because they want:

• The potential for their money to grow.
• A regular income or withdrawals.
• A mixture of both.

You can’t invest in our With-Profit Fund directly. Instead, you have to invest through an investment bond, a pension or annuity.

How your money aims to grow

With-profits is a type of investment where the returns earned by the fund are shared out through a system of bonuses using a process called ‘smoothing’. We will first explain how bonuses work, and then describe where smoothing fits into this.

How bonuses work

If you put some money in our With-Profit Fund, your investment will grow when bonuses are added to it.

The exact value of each bonus – and which one(s) you receive – depends on how well the With-Profit Fund has performed and which product you’ve invested through. Bonuses can go down as well as up and are not guaranteed to be paid.

They can include:

• A regular bonus – these are announced at least once a year, no matter which type of product you’ve invested in.
• A final bonus – which may be paid when you make a claim, withdrawal or switch to another fund. If you invest through a pension, it might also be paid when you take your pension benefits.
• An additional bonus – which might be paid on top of your regular bonus if the fund performs particularly well (only if you’ve invested in with-profits through the With Profits Pension Annuity).

For more in-depth information about bonuses, read our useful guides or frequently asked questions.

‘Smoothing’ helps your investment grow steadily

With-profits investments are designed to grow steadily in value from year to year, rather than being subject to the significant ups and downs of the stock market. That’s because we use a process called ‘smoothing’.

We ‘smooth’ fluctuations in the value of your investment by holding back some of the returns in good investment years. We then use that money to help pay bonuses in years when the performance hasn’t been as good. Equally, losses made in poor investment years may lead to lower bonuses in good years.

The downsides

• Because of how your money is invested (in a mix of equities, corporate bonds and other assets), we can’t guarantee that your investment will grow. Its value can go down as well as up, and you may not get back the amount you invested.
• There may be times when smoothing cannot fully protect your investment and we need to enforce what's known as a market value reduction (often shortened to 'MVR'). If you make a withdrawal or switch to another fund whilst an MVR is in force, the value of your investment will be reduced. An MVR will not apply on death claims or when a policy reaches its 'no MVR guarantee' date (where applicable). We will also not normally apply an MVR if you take benefits from a pension policy on the date you originally told us you were going to retire.

If you’d like to find out more, please call us or speak to your financial adviser. If you don’t have an adviser, you can find one in your area at unbiased.co.uk.

How your money is invested

As a with-profits investor, your money is pooled with others’ and invested in a range of different assets (known as an asset mix), which make up our With-Profit Fund. By investing in a range of different assets rather than just one, we aim to achieve a more balanced return. However, this is no guarantee that the value of your investment won’t go down and you may get back less than you originally invested.

The fund will always hold a mixture of higher and lower risk assets to help achieve its objectives. Higher risks assets include equities and property; medium and low risk investments include gilts, corporate bonds, cash and cash alternatives.

The types of asset we invest in

You can find out what the current asset mix is by reading our useful guides. We use our investment expertise to decide the best selection of assets (or asset mix) in which to invest. They include:

• UK and international equities

  Equities are shares in companies listed on stock exchanges around the world. As shares can rise and fall in value very easily, equities are riskier than many other investments, but usually offer the greatest potential for higher returns in the long run.

• Property

  Direct investment can be made in commercial property, such as major shopping centres and business offices, but indirect property investments can also be made, for example in quoted property trusts and unregulated collective investment schemes. The value of property investments can go down as well as up and depends on the valuer's opinion.

• Gilts

  These are loans to the UK government (also known as government bonds). The government pays interest on the loan and pledges to repay the debt at a certain point in the future. Gilts are traded on the stock market and their value can rise and fall.

• Corporate bonds

  These are loans to UK and international companies. The company pays interest on the loan and pledges to repay the debt at a certain point in time. Corporate bonds are seen as riskier than gilts because companies are more liable to fail to repay the loan than governments. Like gilts, corporate bonds are traded on the stockmarket and the value of investments in them can rise and fall. They do often offer a higher rate of return to balance out the higher risk.

• Cash and cash alternatives

  This includes a range of short term deposits (cash) - similar to a bank/building society account – and money market securities (cash alternatives), which are interest generating investments, issued by governments, major banks and other institutions. Cash and cash alternatives play an important role in providing a balanced return. Although cash alternatives provide a low risk return, their value can rise and fall.

The guarantees

When you invest in our With-Profit Fund, there’s a chance that the value of your investment could go down - rather than up, as you'd like it to. So to put your mind at rest, we offer some guarantees.

The guarantees open to you vary depending on which product you invest in with-profits through. Conditions apply to each.

Guarantee when investing through Portfolio (our investment bond):

• You’ll get back at least your original payment (minus any withdrawals you’ve made) if you take all your money out of the With-Profit Fund on its tenth anniversary.
• If you invest in our With-Profit Guaranteed Fund you'll get back at least your original payment (minus any withdrawals you've made) if you take all your money out of the fund on its fifth anniversary. There is no guarantee on the tenth anniversary.

Get more in-depth information about these guarantees in our useful guide to Portfolio (PDF 161KB) and our Portfolio fund guide (PDF 291KB).

Guarantees when investing though a pension:

• If you keep your money in your pension fund until the retirement date you originally chose or your death, we guarantee to pay all the regular bonuses that have been added to your plan over the years, even if the stock market falls significantly (ie we won't apply an MVR). Please be aware that the guarantee may not apply in all cases. It does depend on your investment term. Any changes you make to your plan term could affect the guarantee. Make sure you read our pension (PDF 157KB) and stakeholder pension (PDF 152KB) guides for further information.

Guarantees when investing through an annuity:

• Your annuity income will never fall below a minimum amount.
• We won’t change your annuity income more than once a year.

To find out more, read our useful guide to annuities (PDF 146KB).

Need more information?

If you’d like somebody to talk through the options with you, give one of our advisers a call, using the number listed over on the right.

Alternatively, contact your own financial adviser. If you don’t have one already, you can find one in your area at unbiased.co.uk.

How we manage the funds

As an investor in our With-Profit Fund, you can be confident that your money will be handled with expert care and attention.

Guides to explain our principles and practices

To help you understand how we manage the With-Profit Fund in which you’re invested, we produce two guides.

There's a very detailed, highly technical guide called the Principles and Practices of Financial Management (PPFM) and there is a simplified, more reader friendly version. Both of these guides can be downloaded from our With-Profits useful guides page.

Ensuring fairness through our With-Profits Committee

We're committed to treating our customers, as a group, fairly at all times. To support this, we have a With-Profits Committee which brings independent expertise and oversight, to ensure fairness is fully considered in our with-profit decision making.

Read more about the With-Profits Committee

Need more help?

Call one of our advisers using the number listed on the right, or get answers to the most-asked questions.

Of course, you could also speak to your own financial adviser. If you don’t have one already, you can find one in your area at unbiased.co.uk.

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