With-profit Funds explained

With-profits Investments

With-profits investments differ from direct stock market or unit-linked investments in that, rather than immediately experiencing the ups and downs of market volatility, investors’ Fund values grow by the addition of annual and final bonuses based on the profits of the With-profits Fund. The With-profits model holds back some of the returns made on its funds in good years to subsidise bonuses in years of weaker market performance and guarantees to pay out all invested capital plus added bonuses on death.

With-profits continue to make up a considerable proportion of investments in the UK. They will not be appropriate for every person but they have a place in the portfolios of people looking for a cautious investment that is likely to outperform cash deposits and provide capital protection over the medium to long term. With-profits works if investors are looking to diversify their risk or who are looking for a less volatile alternative to many managed funds.

With-profits Funds should ideally be held for 5 years or more.

Our With-profits Fund

Healthy Investment’s Ethical With-profits Fund aims to provide members with steady growth through a cautious, actively managed Fund over the medium to long term, whilst smoothing out the fluctuations in investment markets. It offers investors a way to invest and save for their future in an ethical and cautious With-profits Fund that invests in a mix of different assets, which might be difficult to achieve as a direct individual. These include government and company bonds, UK and global shares, commercial property and cash deposits.

We ensure that our investment stance reflects the Society’s commitment to provide ethical saving and investments, by allocating more of the Fund to companies with stronger environmental, social and governance characteristics. We avoid investing in companies involved in certain industries and activities which are of concern to our members, including the alcohol, arms or tobacco industries and gambling and pornography providers. We also avoid investing in companies that do not have mechanisms in place to uphold human rights or who cannot demonstrate responsible business practices.

By investing members’ money ethically and responsibly we aim to deliver long term value in a thoughtful way that supports a healthier financial future.

To maximise the potential return, the stocks and shares, commercial property and fixed interest bonds in the Ethical With-profits Fund are professionally and actively managed. We use external fund managers who have the skills and expertise in each asset class to seek every opportunity for growth whilst only exposing the Society to an acceptable level of risk. They provide a bespoke service and manage the investment strategy, asset allocation and individual stock and asset selections.

Bonuses

In a With-profit Fund investors share in all of the profits of the Society after deduction of running costs and receive their share in the form of bonuses that reflect the performance of the investments in the Fund. There are three types of bonus, Annual, Interim and Final, and all are important.

Annual, or reversionary bonuses are declared each year, added to the investment and reflect the performance of the investments in the Fund.

Interim bonuses are added if a policy is surrendered or a withdrawal takes place and covers the period between the end of the year of the last declared bonus and the date of any withdrawal. Final, or terminal bonuses may be paid to further increase the amount members receive when investments are finally withdrawn, to ensure that investors receive their fair share of the returns generated by the With-profits Fund.

Bonus rates are set by the Board of the Society, after taking advice from the Society’s With-profits Actuary and listening to the views of an independent With-profits Committee. The level of bonus depends primarily on investment performance; however our expenses over the previous year and our solvency margin as well as the Board’s expectations of future performance can also influence the timing and level of bonus we are able to declare. It also reflects any capital and bonus guarantees on your investment. 

Although bonuses may sometimes be higher than savings interest rates, with-profits investments are not the same as bank or building society accounts and carry different risks. For instance, the value of your investment can go down as well as up and you may get back less than you invest.

Smoothing

One of the main aims of the Healthy Investment Ethical With-profits Fund is to reduce the impact of short term market volatility and to help provide investors with a consistent return. This is achieved by “smoothing” the amount of annual return where some of the returns are retained in periods of good investment returns and applied during periods when investment returns are not as good.

This is of great benefit especially where a With-profits Fund is being used to fund something which happens at a specific date such as retirement.