With-profits Jargon Buster

Conventional Plan Conventional with-profits plans are plans that are not unitised. These have a guaranteed amount payable on certain events. These plans don’t allow a choice of funds to invest in. These are sometimes called traditional with-profits plans.
Equity Often called shares. Certificates or book entries representing ownership in a company or similar entity. Their value can rise and fall daily.
Estate The estate is the part of the with-profits fund not required to cover the fund’s expected payments.
Final bonus Often called a terminal bonus. We will work out your fair share of the fund and consider paying a final bonus when you leave the fund.
Financial instruments Financial instruments are assets that can be traded. These assets can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of ownership of an asset.
Fixed and variable interest investments Bank deposits and securities issued by governments, companies or financial institutions where the fund receives a fixed or variable rate of interest. Their value and attractiveness to buyers and sellers may change as interest rates and market conditions change.
Guarantees A commitment to pay certain fixed benefit(s) on particular date(s). All plans invested in the fund carry a guarantee of some kind, for example, regular bonuses already allocated that can’t be taken away. Please see your plan terms and conditions for more information.
Independent Person A person independent of Zurich with appropriate skills and expertise. He or she is asked to report each year on how we have complied with the Principles and Practices of Financial Management. The name of the independent person and the date he or she was appointed is included in the report.
Market value reduction (MVR) A reduction that may be applied to the nominal value of with-profits units if you leave the fund early, to reflect the current market values. Your plan documents or yearly statement will show any date when we have agreed we won’t apply an MVR. We consider using the MVR to make sure customers ending their investment in the fund before the current plan retirement date get their fair entitlement. Sometimes referred to as market level adjustment or market level adjuster.
Maturity The end date of the plan. On pension plans this is often referred to as the normal retirement date or selected retirement date.
Plan/Policy conditions The document which sets out how we will administer a plan.
Principles and practices of Financial Management This document, often referred to as the PPFM, sets out in full the way we manage the fund for the benefit of all the policyholders who invest in it. A summary, called "How we manage the with-profits fund" is available. These are available in the information sections for each plan type.
Property Investment in commercial property such as offices, factories and retail outlets. Their value can rise and fall. None of the with-profits funds invest in residential property.
Regular Bonus An amount added during the term of the plan to increase the value of guarantees. We consider paying a regular bonus at the end of each year. We determine the bonus rate by complex calculations, looking at the return on the underlying assets, the level of bonuses we declared in previous years and other assumptions – especially future guarantee costs and anticipated investment returns. Sometimes called a reversionary bonus.
Repurchase agreement (Repo) An agreement in which one party sells a share or fixed or variable interest investment to another party and agrees to repurchase it on a specified date for a specified price. 
Shares Often referred to as equities. Certificates or book entries representing ownership in a company or similar entity. Their value can rise and fall daily.
Asset Something of monetary value.
Asset share Your asset share is the value of your share in the fund based on its performance.
Cash When used in an investment sense, cash can mean short term deposits similar to a bank/building society account.
Transfer value The amount paid to another insurer if you end your investment with us before retirement.
Surrender The cancellation of a plan before maturity. Surrender values are not guaranteed and can change without notice.
Share options A share option is the right but not the obligation to buy or sell shares at a specified price. We use options to give the fund some protection if share prices fall below a certain level. We may buy this protection and we may offset some or all of the cost by agreeing to sell shares at a predetermined price if equity markets rise above a certain level. We may link the options to individual shares or an index.
Smoothing Rather than the fund being subject to the ups and downs associated with shares, we smooth the fluctuations in value by holding back some of the investment returns in good times. We then use that money to top up bonuses in the times where investment performance is lower. We may not add a bonus, for example, if the guaranteed benefits are higher than the growth of the fund.
Unit-linked or unitised plan On a unit-linked plan you buy units and the plan value depends on the value of those units. You could usually choose funds other than with-profits to invest in.
With-profits A with-profits plan is an insurance contract that participates in the profits of the fund. We pool the payments made by planholders in the fund and use the pooled assets to pay out claims and other settlements.
With-profits actuary The with-profits actuary advises the board of Zurich on its use of discretion in respect of with-profits business. The with-profits actuary is appointed by Zurich.
With profits 90:10 This fund shares out its profits and losses to policyholders and Zurich. Policyholders will receive 90% and Zurich 10%.
With-profits 100:0 In this fund policyholders benefit from all (100%) of the fund’s investment returns, but pay contractual charges and, for life contracts, tax. Zurich does not take any share in the investment returns.