The With Profits Market
The size of the with profit market (i.e.the current value of all money held in with profits policies) today is estimated to be £300 Billion!
This figure is astonishing because it implies that with profits policies must be good. Otherwise why do so many people (12 million approximately) hold money in them?
If there is one thing we have learned about the Financial Services world and industry in the past few years is that just because something is big, doesn’t mean it is good.
This definitely applies to with-profits. Just because there is such a vast amount of money in this area it does not mean that it is good for investors to be in this area. Bear in mind just one statistic when reviewing this sentence: about 1/3 of all that £300 billion is in funds that have achieved NO GROWTH over the past five years.
Another thing we have learned is that Financial Services companies are very good at dressing up investments and plans and making them look good. This definitely applies to with-profits.
The real reasons why so many people have so much money in with-profits is because of a basic trick applied by the companies: they make with-profits sound good, but wrap up all the detail in such complex and convoluted terminology, surrounded by rafts of paperwork, that virtually no-one can understand what they have.
This can (and often does) lead to a situation where what you see is not what you get. For example there may be plans that offer headline bonuses (maybe 5% per year) but then have clauses which allow these bonuses to be whipped away at a moment’s notice.
Now, much of this £300 billion is within with profit funds that are very poor, both in terms of past performance and future prospects.
Some of the £300 billion is in funds which are good and have good prospects. This is the problem with describing everything under the same banner, because not all with-profits are the same, some are good, some indifferent, some are just terrible (there is no other way to put it).
Our site aims to break this down company by company and, crucially, by offering an individual assessment we can help you assess your own individual with profits fund holding or with-profits policy.