Your With Profits Pension Policy
£295 Billion and counting – Download PFD HERE With Profits Pension Policy
It is estimated that there is over £295 billion held in the UK by investors in with-profits pension plans.
With so much money invested you might think with-profits are a good place to have your money invested.
They are very good in one respect: good for the Insurance Companies that manage them, because they make millions in fees out of with-profits funds.
These Companies profit from investors and savers leaving their money in with-profits, often with no or little growth but with high charges.
Upwards of 12 million people are estimated to have some money in a with-profits fund.
These were extremely popular in the period from the 1970s through to the early 2000s and here’s the irony: they were very good investments, for much of this time. However, over the past ten years or so with-profits returns have plummeted and millions of policies are now in a desperate state.
How we can help?
If you have a with-profits pension plan we can give you a company by company analysis at a general level and offer you a personalised report where we can provide you with an individual assessment and review of your own with-profits position.
All you have to do is enter your details and the name of your with-profits product provider into the contact us page of this website
Is my with profits policy good or bad?
Some good with-profits providers may have individual policies which are performing badly or need attention; alternatively some poor providers may have situations where you would be best-placed staying with them.
This is the irony: it is impossible to provide blanket advice or guidance around any company without looking at the individual facts/position. If you have money in a with profits Pension then you can only really assess its full value and all the considerations about whether you should stick or twist with an individual, tailored report.
You can request a With Profits Review by completing the contact us page and entering your pension providers names in the comments box.
The “terminal bonus risk” – do you know if your policy is affected?
This example of a current with-profits value is a real example. It is typical of millions of policies. What it shows is a split between the core value of the policy and the value which has been enhanced due to a terminal bonus. The terminal bonus amount is constantly subject to reduction or withdrawal.
The diagram above demonstrates a simple problem.
A problem that exists for many investors who have their pension money in a with-Profits pension plan.
Do you have this problem?
The bonuses being paid to increase the value of a policy are today – more likely than not – to be terminal bonuses. These are sometimes also known as “final bonuses”.
Over the last ten years more and more with-profits companies have changed their approach to allocate returns to you which are based on terminal bonuses not annual bonuses.
Terminal bonuses are far easier to reduce or withdraw should asset values within the fund under-perform.
It is our experience that most with-profits policyholders are not aware of this. In other words what looks to be a secure value is not; it can reduce and almost certainly will if markets misbehave and assets start to fall in value.
In the example above over 40% of the current value is a terminal bonus entitlement. This is not unusual.
This 40% is subject to manipulation.
What can the policyholder do to protect against this?
They can transfer or switch and effectively LOCK DOWN THE TERMINAL BONUS ENTITLEMENT, i.e. take it and secure it. But this requires an action – leaving it will simply keep it at risk.
Is this a sensible move every time? No, not necessarily – there may be factors which suggest leaving it as it is. But this is not the main point.
The main point is this: when we review with-profits policies for savers/investors we commonly find that they do not know that this part of the overall current value is exposed to such a dramatic risk.
And – when they find out that they can do something about this and “lock” in their values, they often do so.
This aspect, what we call the “terminal bonus risk” is just one factor to consider if you are looking at your policy or fund and wondering what to do with it going forward. There can be other factors, positive and negative, to consider which will affect your decision whether to stick or twist.
There is only one way to truly get an accurate and clear overview, which is to have a review of your policy. This review will look at your policy conditions, its current value, how much of this is a terminal bonus, will assess the risks and can set out, for you, the options going forward.
To get such a review you can use our personal report service; this is a service we provide which will give you all the facts and figures and outline everything you need to know to see what the position is with your policy. All you need to do is complete the contact us form and put your pension provider’s names in the comment box to kick start this process.
Factors you need to consider…
- Do I have a guarantee?
- How is my plan performing?
- What are the charges I am paying?
- What are the future prospects?
- Is there a penalty on my money if I move or cash-in?
- How strong is the with-profits company I am with?
- Are there better alternatives for this money?
Below is a list of all of the companies for which reports are currently available, if your company is not here please fill in contact form with the name of the company in the comments box.
Do you have a with-profits policy with a company not on this list? Don’t worry we can review any policy for any company. It may be that your policy has changed ownership and/or the company has changed its name. Or it may be with a company that does not produce easily obtained data, which restricts us from including it on these pages. We can produce a review on any company in the market for you, so simply use our contact us form to order up a review of your policy – even if you can’t find the company listed above.