An annuity is a product that you buy from a life insurance company. You usually buy it with your pension fund, but some can be bought with other money that you may have from savings or elsewhere. The annuity will pay you a regular income throughout your retirement. Whilst you might think that you could be better off just living off the money as savings, annuities are specifically designed to guarantee you an income for the rest of your life. An annuity is a lifetime commitment, and once taken out cannot usually be cancelled.


An asset is a type of investment. Different types of assets include equities (company shares), gilts (loans to the UK government), corporate bonds (loans to companies), property or cash and cash alternatives. These assets have different levels of risk, which means some have the potential to provide greater returns than others. With this greater potential comes the increased risk that the value of your investment may decrease and you may get back less than the amount you invested. In a With-Profit Fund, we invest your money into a broad range of assets called the asset mix.

Asset mix

In simple terms, we invest your money into a broad range of assets called the asset mix. The value of your investment depends on the mix of assets in the fund and how each performs. The With-Profit Fund will always hold a mixture of higher and lower risk assets to achieve its objectives. The value of your investment can go down as well as up and is not guaranteed. You may get back less than the amount you invested.

Basic sum assured

The basic sum assured attracts regular (also known as reversionary or annual) bonuses which are used to distribute the profits of the With-Profit Fund to your policy. Regular bonuses are not guaranteed however once added, it cannot be removed from the policy. For policies with a maturity date the required premiums must have been maintained to receive payment of the basic sum assured and bonuses. If the premiums have not been maintained a reduced amount will be paid.

Conventional with-profits

Conventional with-profits contracts have a basic sum assured to which bonuses, if applicable, are added. The basic sum assured is the minimum amount of life assurance payable on death, it is also the minimum lump sum payable at maturity. The basic sum assured is paid on pension plans at maturity too.


The specific features of an endowment can vary depending on the type of policy bought. As an example, a ‘low-cost endowment’ was a product that combined life insurance and investment in one package, with the aim of providing a lump sum to pay off a mortgage at the end of the term. The intention was that the endowment policy should grow to produce a lump sum large enough to repay the loan in full at the end of the pre-agreed period, normally 25 years.

Sales of low-cost endowment policies have been discontinued by Aviva and many other providers.

Final Bonus

Final bonus aims to pay any balance between the regular bonuses we have already added and the performance of the fund over the whole period of your investment. You may receive a final bonus when you take your benefits. This makes sure that you get a fair share of the return your investment has earned.

Investment bond

An investment bond is a product that allows you to invest a lump sum of money. For our investment bond, Select Investment, you will need a minimum lump sum of £10,000. It should be considered a medium-to long-term investment (at least 5 to 10 years). The value of your investment can also go down as well as up, and is not guaranteed. You may get back less than the amount you invested.

You can choose to spread your lump sum across a range of different funds. Funds allow investors to pool their money together, to take advantage of buying in bulk and spreading the money across lots of different investments. The funds are run by expert fund managers. All funds have different investment objectives and levels of risk.

Market Value Reduction (MVR)

This is a reduction we sometimes have to make so that customers who remain invested in the With-Profit Fund are not disadvantaged when others choose to leave.

Natural income/Fixed income

Under the With-Profit Income Fund option (previously available through Porfolio Bond) the regular bonus, if applicable, is paid out as an income, either natural or fixed. Natural income aims to maintain the initial amount allocated to your investment in the fund. Under this option, your income will vary with the bonus rates. The fixed income option allows you to choose the level of income you receive but depending on the amount you choose, you may be taking out more money than your bond is making. This could reduce the value of your investment and you may get back less than the amount you invested.


Most pension plans that are not based on final salary are quite simply long-term investments that help you plan for retirement. The money is collected together and the pension provider will invest this money in yours and the other contributors chosen funds. You get tax relief on the payments you make up to the HM Revenue and Customs limits.

Tax rules may change in the future.

Pension plans are designed for you to make any or all of the following payments:

  • regular payments throughout your working life
  • one or more single payments
  • one or more transfer payments from another pension plan.

If you are employed, your employer can also make regular or single payments.

Payments have to remain invested, without access, until you at least reach the minimum retirement age, which is normally 55. Please remember, the value of your pension fund can go down as well as up and is not guaranteed and may be worth less than the amount paid in.

Regular bonus

Regular bonuses are designed to be sustainable growth over time in the value of your investment. We decide regular bonuses at least twice a year. To determine regular bonus rates for conventional and unitised policies, we estimate the future investment return we expect to earn in the long term on the assets of the fund. Regular bonus rates are then set taking this into account.

Unitised with-profits

We divide your investment into units of equal monetary value. The number of units you buy with your investment depends on the unit price of the fund on the date you invest your money in the With-Profit Fund. We add your share of the returns the With-Profit Fund earns through a system of bonuses. We add the regular bonus, if applicable, to your investment by increasing the price of the units you have. The number of units stays the same unless any additional investment is made (this may not be possible depending on which policy you have).

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