The Myths of With Profits Investment Funds

Introduction - The Myth Of With-Profits

The greatest single problem with the with-profit market is that many investors believe they have one type of investment when they actually have something totally different.

With-profits investments are fundamentally understood. If you were to stop an investor in the street and ask them to explain a building society account, the chances are you will get a coherent answer. If you ask them to explain with-profits investments, you will not.

Yet, despite this, there is nearly 60% of the total in building society deposits held in with-profits plans. These are not some marginal, little used, product. With-profits are a mainstream and very important investment holding for millions of people in the UK.

They are badly misunderstood and they were sold in bucket loads during the 1970s, 80s and 90s to investors as a particular type of investment when they were something else all together.

They were sold by the insurance industry as:

Secure
Tax Efficient
Steady and reliable return generators
Income efficient.
Particularly good for retired investors as they could form part of an inheritance friendly plan of action.

Not all of these points were incorrect, but a couple were and a couple of others have become so as a result of movements in markets and changes in legislation.

The insurance industry has been hit by many mis-selling scandals. Our site is not encouraging another one: but we do say loud and clear that investors who hold with-profit bonds, pension funds or endowments must urgently review what they have got and what they should be doing about it.

In reality with-profits investments vary tremendously in how well they have preformed, in how secure they have proved and what they have been able to offer investors in the way of tax efficiency.

There are many alternative investments that do the job better in many ways. How many non taxpayers hold with-profit bonds for example, paying tax by default without realising it?

How many people have used with-profit bonds as a home to get a steady income only to find they are in a bond paying 0% bonuses, meaning the only “income” they can get is from taking it out of their own capital.

How many pension savers looking for good long term growth who are in their 30s are in with-profit funds?

How many endowment savers were sold a plan to achieve a repayment of their mortgage who are now thousands of pounds short of their target?

We have dealt with thousands of people who have their money in with-profits investments and these people with very exceptions are confused by what they have, stuck by default and often have little understanding of how they can act to pout the position right. This site is intended to put this right by:

Explaining what with-profits is and how it works.
What you can do if you want to get accurate information on your particular plan or policy?
How to decide whether to exit with-profits or remain with it.

The information on this website is to be viewed as general information and does not constitute advice. Views and opinions expressed are those of the individual contributors. Individuals reading the site should not rely on any of the information contained within the site in making any decisions. DMP Marketing cannot be held responsible for any liability suffered by any individual as a result of information contained within the site. In the event that advice or help is required then independent advice should be sought from a regulated independent adviser.