What is a with profits investment?

Watch our animation to see how investing in traditional with profits products works, and the ways in which it can benefit you.


CAPTION: We all have future plans for our finances, supporting our children through their education, ensuring a comfortable retirement, making sure our families are secure when we’re gone. Investing for the long term in the stock market can be a way to help you achieve these goals. Seeing the value of your investments rise and fall can be a little bit unsettling, but there are some types of investments that can help to give you more peace of mind.

A With Profits product is one where money from yourself and people like you is pulled together into what we call a With Profits fund. It’s spread around a range of investments, including stocks and shares, property, bonds, and cash. These investments are managed by a professional fund manager whose aim is to make your investment grow in the long term.

For a With Profits investment, your policy benefits from investment returns by the addition of bonuses. However, some of the gains may be held back when the stock market is performing well, so we can even at occasions when stock market performance may not be as good. We call this smoothing – a steady return to your policy, compensating for the ups and downs of the investments in the stock market.

Unlike most other types of investment, a With Profits product may also benefit from guarantees: an amount of money that an insurance company will agree to pay you in the event of a claim being received. This is a very valuable feature, and you can find details of any guarantees you have with the documents you received when you originally took out your policy.

Royal London also aims to increase your guaranteed amount by adding bonuses to your policy. We’ll normally do this at least once a year. These can’t be taken away again so long as you keep your policy until it ends. We may also pay you a final bonus when your policy ends.

You can find out more information about how much has been added to your policy on the statement that we send to you each year.

So what could this mean in practice? Let’s say a policy holder paid in £20,000. Bonuses have added £5,000, giving a guaranteed amount of £25,000 when the policy ends. But on the claim date, the value of the investment is £30,000, so Royal London would aim to pay the extra £5,000 growth as the final bonus. Or, if the market performs less well, the policy holder has still paid in £20,000 and bonuses have added £5,000, but the market has fallen so that the value of the investment is now £22,000, however, Royal London will still pay the guaranteed amount of £25,000 on the claim date.

It’s important to remember that all investments come with an element of risk, and you can sometimes get back less than you have paid in. Investments in stocks and shares, bonds and other types of investments will go up and down in value so are different to bank or building society accounts. This is normal, but what you’re likely to get back will always depend on how the stock market has performed.

Your policy may benefit from a valuable guarantee. You should check your policy carefully to see if it has a guarantee before making any decisions such as stopping paying premiums, claiming your benefits early, or transferring your policy. In these circumstances you would lose or reduce the valuable guarantee, we may also no longer add bonuses to your policy.

Need more information? As your policy provider we can give you information about your policy and help you understand your options, but we can’t advise you. To get financial advice, you’ll need to speak to a regulated financial adviser. You can find one in your area by visiting www.unbiased.co.uk. You may have to pay for financial advice, so be sure to check the costs beforehand. We’re still here to help of course, so if you have any general queries, please call us. You’ll find the number on your latest statement. Alternatively, you can find details on how to contact us in the information for customers section of our website. Please quote your policy number when you call.