With most investment products it is necessary for fund managers and advisers to state, in marketing and advertising, that past investment performance is not a guide to the future. Well, perhaps so (although a number of published reports suggest otherwise).

However, as regards with profits investments the past can certainly be a very good guide to the future.

Here are just a few examples from recent assessments conducted by The Pensions Office.

Pearl Assurance haven’t paid an annual bonus since 2001. They don’t expect to pay one in the foreseeable future, either. Why? Because they have, in the past, made so many generous promises and given so many guarantees that this burden now eats away at a large part of any investment profits they make within the fund. Charges take up much of the remainder. Months or years of more recent investment losses have weakened the fund even further.

Co-operative Investment Services haven’t paid an annual bonus on their with profits pension buy-out bonds for around six years, and it seems highly likely they will never be able to do so in the future. Why? Same old story: too many guarantees on previous policies in this class of business and now the fund is invested entirely in fixed interest investments, severely restricting – or even eliminating – any possibility of future bonuses.

Clerical Medical and an increasing number of other with profits insurance companies have declared ‘nil’ or pitifully low annual bonuses (just 0.12% for Clerical Medical). Many of these companies have now openly declared that they do not anticipate returning to an annual bonus declaration. Instead, in future they will rely on the payment of terminal (‘final’) bonuses from time to time (i.e. when the fund has been enjoying good investment performance) interspersed with periods of Market Value Reductions (MVRs) when the fund has not been enjoying good investment performance. So much for the traditional idea that with profits funds would smooth the good times and the bad times for policyholders.

So, the past has now caught up with many with profits providers and is fast catching up with many others. Poor past performance – including poor performance of previous management – has weakened many of these funds so much that they will almost certainly never again be able to offer any realistic possibility of attractive investment returns.

There remains a small number of very solid with profits funds, but they are in a small minority. For the rest, past performance is indeed a guide to the future for their investors.

How can you find out how your with profits fund will fare in the future?