With-profits Policies

A with-profits policy is a type of investment fund.

Policies that are with-profits give the insured the extra benefit of a bonus that is a share of any profits from the funds that the premiums have been invested in.

How and where the premiums are to be invested is worth establishing if you are going to invest in a with-profits product, such as single premium insurance bonds for example. But as with all long-term investments in the stock market or in interest bearing instruments, it is important to stay with them for the long term. That way they have time to build up and "smooth" the short-term ups and downs in rates of return.

Some policies may also benefit from terminal bonuses if they are held for their full term. When choosing insurance products for investment it is important to be aware of what charges, fees or commissions may be attached to them and when profits and bonuses are added to the policies. Some, for example, will be heavily weighted with charges at the beginning of their policy life.

Market Value Adjustments (MVA) - what are they and how do they affect With-Profit investments?

A Market Value Adjustment (MVA) is a way for the insurer to make sure that the amount of money paid out to an investor is a fair reflection of that investor's share of the with-profits fund, and any growth which has been achieved on the fund. The MVA is used to protect the remaining policyholders with units in that fund.

The adjustment is made via a penalty that may be applied if a customer takes units out of a with-profit fund other than on a pre-agreed date, to take account of investment market conditions at the time.

levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.

The value of investments and the income from them may go down. you may not get back the original amount invested.