The annual (‘reversionary’) bonus declaration from many with profits providers has been ‘nil’ or very close to ‘nil’  for quite a few years and seems set to remain that way for some years to come.

Certainly, some of these companies have been declaring at least a modest amount of terminal bonus for those immediately drawing money from their pension scheme but this type of bonus can be withdrawn without notice.

Investors might hope that a sustained rally on the stock market will lead to some improvement in these bonus rates but, unfortunately, some with profits funds have been so badly hurt financially over the last decade or more that they are now invested primarily in fixed interest investments. Long-dated fixed interest bonds are currently yielding less than 4% per annum and so, after charges within the fund, there may not be many profits to distribute to investors.

Worse, many funds are still burdened by generous promises made to investors in previous years, including high reversionary bonus rates and, often, high guaranteed annuity rates. These may continue to eat away at such ‘profits’ as might be made from those already-weak funds.

A relatively small number of with profits funds remain solid, but weak financial prospects are envisaged* for a large number of funds, including those listed above.

If you are invested in a with profits fund, please check your recent bonus statements. It is highly likely they will not provide enjoyable reading. If you can’t find your bonus notices we can make enquiries on your behalf so that, at least, you will know what has been happening to your hard-earned investments.

Don’t throw good money after bad……