Your friendly guide to our main With-Profits fund

Investing can sometimes feel like navigating a maze, but fear not. With our handy guide, understanding 'with-profits' investments will be a breeze.

Here we explain briefly how our a With-Profits investment in the Main Fund works and our approach to managing it. Let's dive in and demystify the world of this investment together.

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What is a With-Profits plan?

Our With-Profits plan is designed for the medium to long term and brings together your money with funds from other investors in a With-Profits investment in the Main Fund.

Here's why it could be a great choice:

  • Diverse investments: enjoy a well-balanced mix of investments.

  • Steadier returns: experience smoothing of any investment returns achieved.

  • Guaranteed security: after 10 years (and every 5 years thereafter), you're guaranteed to receive at least what you've invested, plus any guaranteed uplifts added during your investment.

Understanding our Main Fund

We pool and invest money from all our plan holders into our Main Fund, which covers a wide range of investment types.

The investment performance of this fund is key to your plan's generated profits and value.

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Understanding smoothing terms

When describing our approach to smoothing and how we work out plan values we use the following terms:

  • Smoothed value: this is what you'll receive, after smoothing out the highs and lows of the Main Fund's performance.

  • Unsmoothed value: the true value of your investments, reflecting the actual performance of our Main Fund.

Let's talk bonuses...

We love sharing our profits with you, and we do that through bonuses added to your investment. Here's what you need to know about them:

Regular bonus:

Normally added throughout each year. We can change the rate of regular bonus at any time without prior notice.

Final bonus:

May be paid when you take money out of your plan. A final bonus may vary and is not guaranteed.

When determining the regular bonus, we primarily focus on the expected future returns of our investments. We set aside some of the returns earned with the goal of using them to boost future claim payouts as a final bonus.

If you withdraw money from your plan outside of guaranteed periods, your payout might be lower. We'll dive deeper into this below.

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More on final bonuses...

Final bonuses are calculated by consolidating the unsmoothed values of similar investments (typically based on the date of investment). This helps us figure out what final bonus to pay to align the total claim value with the consolidated unsmoothed value.

The unsmoothed value of your plan depends on various factors, including:

  • The initial investment amount (after any withdrawals)

  • Duration of the investment

  • Performance of the Main Fund

  • Associated charges and costs

  • Tax implications (if any)

  • And any other profits or losses within the Society.

Understanding smoothing

Ever wonder how we maintain aim to maintain stability in your investment returns? It's all about smoothing things out!

In exceptionally good years, we set aside some of the investment returns. Then, when years aren't so rosy, we tap into these reserves to support bonus rates. This strategy gives you some protection against any bumps in investment performance.

Is your payout guaranteed?

We don't offer a fixed payout from the Fund. Instead, we guarantee a minimum amount that you'll receive when you decide to withdraw your money. This could be after 10 years or on specific occasions like your chosen retirement date detailed in your pension plan, or in the event of your passing.

So, what's included in this guaranteed minimum amount? It's the sum of your initial investment plus any regular bonuses we've added along the way. Then, we could sweeten things by adding in any final bonus. Your total payout, also known as the smoothed value, consists of this guaranteed minimum amount plus any final bonus.

Sharing in our success (and bearing losses)

We're a mutual organisation, meaning we're here for the benefit of our members—like you! When you invest in the Main Fund, you become part of our story. Any profits (or losses) we make are shared with you and added to the unsmoothed value of your plan.

Each year, our Board decides how much of the profit or loss gets allocated to the unsmoothed value of the Main Fund. For instance, if you were invested throughout the entire 2023 calendar year, you'd have enjoyed a 2% boost to your plan on top of the investment returns achieved. It's just one of the perks of being part of our community!


Thinking of withdrawing your money?

Here's what you need to know:

Sometimes, if you decide to move your money out of the Main Fund, we might apply something called a Market Value Reduction (MVR) to your payout.

But don't worry, we only do this if the unsmoothed value of your investment is less than the smoothed value. The goal? To safeguard members who stick with our Main Fund from the impact of others leaving.

Rest assured, we'll never apply an MVR that drops your payout below the unsmoothed value of your investment.

However, there are exceptions! We won't apply an MVR if you withdraw your money on a date covered by a guarantee or during certain life events like in the unfortunate event of your death.

Understanding the inherited estate

Here's the scoop: as a well-established life assurance company, our Main Fund holds more money than what we anticipate paying out to existing plan holders. This extra sum is known as the inherited estate. It's been accumulating over the years from various sources and serves as the backbone of our operations, providing the necessary capital to support both current and future business endeavors.

So, what does this mean for you as an investor in the Main Fund? Well, quite a bit! The inherited estate enables you to enjoy the benefits of smoothed payouts and protection of guarantees. It also gives us the flexibility to invest in a wide range of assets, ensuring a diversified investment strategy.

Additionally, regulatory requirements mandate that we maintain a substantial amount of capital in the Main Fund to demonstrate solvency and meet obligations to all planholders. The inherited estate plays a crucial role in fulfilling this requirement.

Now, it's important to note that planholders shouldn't expect to receive distributions directly from the inherited estate, aside from the normal smoothing operations. It's there to keep things running smoothly behind the scenes for everyone's benefit.