The with-profits funds explained
Fund information: unit linked plans in series 1, 2, 2a, 2b, 3, 3b & 7The with-profits 90:10 fund shares out its profits and losses to policyholders and Zurich. Policyholders receive 90% and Zurich 10%. The fund invests in fixed and variable interest investments, shares, property, cash and more complex financial instruments.
The mix of investments varies between groups of plans. The asset mix for unit linked plans is shown below. The investment mix has not changed significantly compared to 30 June 2017. Earlier in 2017 the proportion invested in property reduced as a result of a property sale but the proportion invested in shares has now increased so that the combined percentage invested in shares and options and property remains close to 28%.
We seek additional income by selling some fixed interest assets with an agreement to buy them back and using the proceeds to buy variable rate bonds. This is known as a sale and repurchase agreement. The asset mix shown here is calculated net of the liability to repurchase the fixed interest assets held in connection with the sale and repurchase agreement.
How did the funds perform in the 12 months to 30 September 2017?
The return achieved by the assets allocated to unit linked plans was 8.9% before tax and charges. This return is applicable to pension plans and reduced to 7.6% for life and investment plans before charges because of tax we have to pay. The charges for managing the fund were approximately 0.5%.
Previous performance figures
Before tax and charges
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 6.0% -0.4% 9.0% 12.4% 6.4% 6.9% 4.4% 7.6% 1.3% 8.7%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5.4% -0.1% 7.3% 10.2% 5.5% 5.8% 3.9% 6.4% 1.3% 7.2%
Current bonus rates
The rates below were declared on 09 January 2017Series 1 EP (excluding Offshore Series 1): The price of units in this series changes every day as it's calculated with reference to the value of the underlying fund. The unit price includes the adjustment which for other series is made by adding final bonus or applying an MVR. There is a guaranteed minimum price, which applies on your selected retirement date and during 2017 it will increase by 2%. The guaranteed minimum price at 31 December 2016 was 346.7p. The price at which units were sold on 31 December 2016 was 715.0p.
Life Plans excluding Investment Bonds
Fund Series Regular Bonus Current Final Bonus** 3 EL 1.6%* 116% 3b EL 1.6%* 35% 2 EL 3%* 72% 2a EL 1.6%* 85% 2b EL 1.6%* 35%
Fund Series Regular Bonus Current Final Bonus** 2 EL 3%* 70% 3 EL 1.6% 96%
Pension Plan excluding Trustee Investment Plans
Fund Series Regular Bonus Current Final Bonus** 2b EP 2%* 51% 3 EP 2% 85% 3b EP 2% 51% 7 EP 4%* 28% Offshore 1 EP 4%* 28% 2 EP 4%* 28% 2a EP 2%* 91%
* This includes the guaranteed rate of annual bonus.
** Final bonuses or MVRs do not apply to Series 1 (other than Offshore Series 1). The rate of any final bonus or MVR is periodically reviewed and changes from time to time so each generation of investors receives their fair share of the fund's performance. This is calculated by comparing the value of the plan's share in the fund based on fund performance (the 'asset share') which includes bonuses added since the plan started.
Now the fund is closed, we aim to give all remaining investors a fair share of the estate. The estate is the part of the fund we can use to help maintain bonus rates in poor times and to meet unexpected payments. For 2017, unless plan guarantees are higher, we will include in the final bonus rate an estate distribution of 16% of asset share for investors leaving the fund. This rate can change at any time and may cause significant changes in plan values. A final bonus increases the total value of the with-profits units in that series. Many plans have a date on which we guarantee not to apply any MVR. This date will be shown on your yearly statement, although since 6 September 2010 we have not applied an MVR to any withdrawals from, or cancellations to, plans investing in the with-profits funds.
Information we send to customers
From June 2015 yearly bonus information has been included with yearly statements.
A copy of the leaflets, showing information about fund performance over the previous 12 months can be found through the following links:
Bonus leaflets for year to:
How is the with-profits 90:10 fund managed?
There are two guides:
The ‘Principles and Practices of Financial Management’ (PPFM) shows how we manage the money in the with-profits 90:10 fund. This was last updated in April 2017.
Summary of the full manual pdf (last updated April 2017)
How do I know you're managing the fund properly?
Zurich Assurance Ltd has to tell its with-profits policyholders each year if it has complied with its obligations in the PPFM (Principles and Practices of Financial Management). It does this through the annual report (last published in April 2017, next issue due April 2018) from the board of directors, including a separate report from the with-profits actuary on Zurich Assurance Ltd's compliance with the PPFM. In preparing the report, the directors seek the view of the independent person.
It is the opinion of the board of directors that during 2016:
- the company has complied with its obligations in the PPFM
- the way discretion was exercised was appropriate
- competing or conflicting rights, interests or expectations were addressed in a reasonable and proportionate manner.
The report contains further information on this, particularly for bonus rates, investment strategy, surrender values, expenses and charges, changes to the PPFM and customer communications. (you may wish to refer to the PPFM for the definition of technical terms).
The board of directors have appointed Steve Dixon to provide it with an independent assessment of compliance with the PPFM. Mr Dixon will also advise the board on how any competing or conflicting rights and interests of policyholders and shareholders have been addressed. The board have given Mr Dixon this Terms of Reference for his role.
Questions about my plan
Unit linked plans were sold after 1985 and generally offered a choice of funds to invest in, including the unit linked with-profits fund. The with-profits fund was closed to new customers in 2003 and is generally no longer available for new investments to existing plans. Payments to us buy units in the fund(s) of your choice. Bonuses are added to these plans by increasing the price of the with-profits units. We send customers a statement each year (near the plan anniversary) showing the value of the units in each fund. Each year, following the bonus declaration, we also send customers information about the fund performance together with a statement telling them what the bonus rate(s) are for the series invested in.
This section aims to provide answers to some of the questions we are asked by customers about their investment in with-profits.The links to third party external sites are provided for the convenience of our website visitors only. Zurich is not responsible for the content of these external sites and does not necessarily endorse the views or agree with the information held on these sites.
Understanding your choicesYou may have been thinking about what to do with your plan, this section will help you understand the choices you have. You might also want to look at the guidance given by the Money Advice Service on their website. [Zurich is not responsible for the content of external websites]
The Questions you may have about your plan section may help to answer some questions you may have about your plan.
The links to third party external sites are provided for the convenience of our website visitors only. Zurich is not responsible for the content of these external sites and does not necessarily endorse the views or agree with the information held on these sites.