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.
Suggested length of investment: 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.
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:
With-profits is a type of investment in which 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 amount of 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. However, once bonuses have been added to your plan they cannot be taken away.
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
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 lower risk investments include gilts, corporate bonds, cash and cash alternatives.
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 most other investments. However, they usually offer the greatest chance of higher returns over the long term. In our With-Profit Fund the equity part of the asset mix includes equity-type assets that are not quoted on stock exchanges, plus alternative investments such as commodities. We only invest a small proportion in alternative investments, typically less than 5%.
This is investment in commercial property, such as shopping centres and business offices. A valuer’s opinion often decides the value of property investments. There can be a delay in moving all or part of investments in property as it may not be possible to sell property investments immediately. It’s important to remember the values of property investments can go down as well as up and are not guaranteed.
Gilts are bonds issued by the UK government as a way for them to borrow money, usually for a fixed term. The government pays interest on the loan. As they are issued by the UK government, they are generally seen as lower risk investments than bonds issued by companies (corporate bonds).
As gilts can be bought and sold on the open market, their value can rise and fall.
Corporate bonds are issued by UK and international companies as a way for them to borrow money. The company pays interest on the loan and promises to repay the debt at a certain point in time.
They are seen as riskier investments than gilts, which are loans to the UK government. This is because companies are more likely to fail to repay the loan than the UK government. However, they often offer a higher rate of return to balance out this higher risk. The highest risk bonds tend to offer the highest potential returns; these are known as high yield bonds.
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, banks and other major 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.
When you invest in our With-Profit Fund, there’s a chance that the value of your investment could go down as well as up, and you may not get back the amount you invested. We may offer from time to time a number of with-profit guarantee funds with different guarantee terms.
The guarantee that may be available to you will vary depending on which product you invest in with-profits through. Conditions apply to each.
To find out more, read our useful guide to annuities (PDF 146KB).
As an investor in our With-Profit Fund, you can be confident that your money will be handled with expert care and attention.
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.
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.
For more information about with-profits or to help you to decide if with-profits is suitable for you, you should seek financial advice.
If you don't have a financial adviser you can find an adviser in your area at Unbiased. Where advice is provided, there may be an additional cost to you.
If you're a new customer you can talk to us on:
0800 015 4785
Calls may be recorded and/or monitored for our joint protection.
Register for our online service where you can securely access details of your existing policy.