It is worth noting that fund performance should also be considered as this can often impact the size of your fund much more than the difference between the cheapest and most expensive contracts. Investment performance does vary over time and as fund managers move on you may find the relative performance of your investment varies dramatically.

With Profits Performance

As far as a provider of with-profits is concerned, its size, underlying fund performance and financial strength determine its bonus philosophy, asset allocation (how much is invested in shares, gilts, property and deposit based funds), MVA policy and indeed its ability to remain in the with-profits market.

Financial Strength

Large financial reserves enables the company to survive periods of poor economic returns without having to cut bonus rates and avoid selling assets at a time when the price obtainable may be low.

A fund manager running a with-profits fund for a company with good reserves has far more scope and investment freedom, thus allowing greater exposure to equities, which have been shown over the longer term to generate the best returns. Companies can also draw against their reserves when stock market returns are not as good as expected, thus enabling them to maintain their bonus rates.

Large financial reserves enables the company to survive periods of poor economic returns without having to cut bonus rates and avoid selling assets at a time when the price obtainable may be low.

It is also important to note that past performance is not necessarily a guide to future performance.