UK With-Profits Funds: investment performance and strategy 2017

Published by Scott Eason on

A recent investigation by Barnett Waddingham has uncovered significant inconsistency in the investment performance of UK with profit funds – a type of medium to long-term investment fund offered by insurers, often as part of a pension or an individual savings account (ISA).  

The survey looked at funds with similar asset allocations representing more than £100bn in total. It showed that overall fund returns ranged from as little as 2.8% to an impressive 16.5%.

The survey also showed that the biggest component to investment return variations is the difference in performance within each asset class. For example, individual fund equity performances were very wide-ranging, with returns varying from 4.4% to 25.0%.

Key findings

0%

of funds in with-profits equities held on average

0%

was the highest overall fund return; 2.8% - the lowest

0

funds investigated, representing a majority market share

£0BN

was the amount represented by the funds surveyed


Scott Eason, Head of Insurance Consulting at Barnett Waddingham said: “It is clear that the investment performance of UK with-profits funds is extremely variable. While some with-profits funds have performed very well, a number of funds have significantly under-performed and this will have had a direct impact on the returns to policyholders.

Such a variation in returns for customers is simply unacceptable and makes it extremely hard for customers, who rely on insurers to get them the best deal. The end customer is not an expert in investments and trusts companies to use their expertise and size to produce returns that can stand up to scrutiny. Unfortunately, many customers of UK with profits funds are not having this experience and are also probably unaware that the inconsistencies exist.

We challenge insurers to increase the frequency and quality of asset manager selection and performance reviews and today we’re also urging independent financial advisors to demand stronger governance to ensure their customers are getting the best returns.”


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With-Profits Survey 2017