The with-profits funds explained

  • Conventional

    Fund information: conventional plans

    The 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.

    Asset Mix

    The mix of investments varies between groups of plans. The asset mix for life and Esitran* plans is shown below:

    The investment mix has not changed significantly in the 12 months to 31 December 2019 and there are no current plans to significantly change the investment mix in 2020. We expect the combined percentage invested in shares and options and property to remain close to 28%.

    For conventional pension plans other than Esitran, the fund invests solely in fixed and variable interest investments to match the high guarantees they have. These plans no longer invest in shares and property.

    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 above is calculated net of the liability to repurchase the fixed interest assets held in connection with the sale and repurchase agreement.

    * An Esitran plan is a type of pension plan which was set up when money was transferred from an occupational pension scheme.


    How did the fund perform in 2019?

    The fund invests differently for different types of plans. For Esitran plans which invest in all the asset types, the return achieved in 2019 was 9.9% before charges. For life plans, due to tax relief on investment losses, the return was 8.1% before charges. The charges for managing the fund were approximately 0.5%.

    Previous performance figures

    Life and Esitran plans

    Before taxes and charges

    2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
    12.4% 6.4%
    6.9% 4.4% 7.6% 1.3% 8.7% 9.8% 0.5% 9.9%

    After tax

    2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
    10.2% 5.5% 5.8% 3.9% 6.4% 1.3% 7.2% 8.3% 0.6% 8.1%

    Pension plans other than Esitran

    Since July 2009 pension plans other than Esitran have invested only in fixed and variable interest investments. This part of the fund returned 9.3% before charges in 2019. The plan guarantees are currently higher than the returns we have achieved since your plan started and those we expect from the fund.
    2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
    10.3% 17.3% 5.2% -4.2% 22.4% 0.5% 16.2% 4.2% 0.6% 9.3%

    Current Bonus rates

    The rates below were declared on 13 January 2020.

    Regular bonus rates

    Regular bonuses are added to plans as a percentage of the basic sum assured and previous bonuses.

    Product Type

    Life Plans

    Pension Plans

    Bonus on Sum Assured



    Bonus on Existing Bonus



    Final bonus rates

    Final bonuses are based on fund performance over the time of the investment in comparison to bonuses already added to make sure each generation of investors receive their fair share. This is calculated by comparing the value of the plan's share in the fund based on fund performance (the 'asset share') with the basic sum assured and bonuses added since the plan started. Any final bonus is calculated as a percentage of attaching bonuses only. Where a plan has been increased, each increase is treated as a separate plan to determine the final bonus rate. Although rates are generally lower for longer durations, they are applied to a much higher level of existing bonuses.

    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 2020, unless plan guarantees are higher, we will include in the final bonus rate an estate distribution of 49% of asset share for investors leaving the fund.

    The rates of final bonus depend on future fund performance and are not guaranteed. They change without notice. This table below shows the current final bonus rates.

    Life Plan Final Bonuses

    Start Year

    Final Bonus For Plans Maturing During 2020








    Only plan increases were allowed. The final bonus rate for the increase varies with each year.


    Start Year

    Final Bonus For Plans Maturing During 2020
    1984-1990 86%
    1991-present The final bonus rate varies with each year.

    Self Employed and Executive Pension Plans (excluding those below)

    Final Bonus For Plans Vesting During 2020: 42%

    Pension plans through an employer scheme, Deferred Annuities and old series Self Employed contracts

    Are not attracting any final bonus (old series Self Employed contracts were written before 1978).

    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 2019, next issue due April 2020) 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 2018:

    • 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 Alison Carr to provide it with an independent assessment of compliance with the PPFM. Mrs Carr will also advise the board on how any competing or conflicting rights and interests of policyholders and shareholders have been addressed. This role is a senior manager appointment (SMF15) within the FCA’s Senior Managers and Certification Regime. The board have given Mrs Carr this Statement of Responsibilities for her role. The Statement of Responsibilities covers all aspects of the management of and the exercise of discretion in respect of the fund, including those matters which Rule 20.5.3 of the FCA’s Conduct of Business Sourcebook requires to be covered in a terms of reference.

    Information we send to customers

    We sent information to customers in March 2020 about the fund performance for 2019. For life plans it includes details of the bonus added.

    A copy of the booklet showing information about the 2019 fund performance can be found through the following links:

    How is the with-profits 90:10 fund managed?

    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 March 2020.

  • Questions about my plan

    Conventional plans were sold widely until the early 1990s. They promised a fixed amount (the sum assured) at maturity/retirement/earlier death. Each year, following the bonus declaration, we send customers information about the fund performance together with a statement telling them what bonuses, if any, have been added. It's no longer possible to increase payments to these types of plans.

    This section aims to provide answers to some of the questions we are asked by customers.

    What are the different types of bonus?

    There are 2 types of bonus, a regular bonus we might add each year and a final bonus we might add when a plan ends.

    More details are available in the How we manage the with-profits 90:10 fund for conventional plans booklet. We are not adding more regular bonuses to pension plans because they have a high level of guaranteed growth which has built up through past bonus additions. It is unlikely that future regular bonuses will be added to these plans as plan holders could get more than their fair share from the fund.

    A final bonus is added, if appropriate, so each group of customers receives a fair share of the fund. Most pension plans do not get a final bonus because of the high rate of growth which has built up through past bonus additions. The only pension plans currently attracting a final bonus are Esitran pension plans as they don’t have such high guarantees.

    How does a with-profits plan work?

    In return for the payments you agreed to make over the plan term we gave a guaranteed amount at maturity, and/or a guaranteed amount at death (which may not be the same amount). We need to keep some of the money you pay us to cover the death benefit risk and some for expenses, such as commission to the adviser and administration. The remainder is available for us to invest on your behalf.

    Included in the guaranteed sum at maturity was an allowance for growth. Every year, when the actual fund returns are known, we decide if we can increase the amount we guarantee by adding a regular bonus. As this is an actual amount we promise will be added at maturity, it also includes an assumption as to the growth we expect to achieve between the date it’s added and the maturity date. Your payments build up like this:

    How are fund returns added to plans?

    The profits and losses of the fund are shared out 90% to policyholders and 10% to Zurich. Overall, however, we can only pay out what the fund achieves. We add the profits of the fund to plans in 2 ways - regular bonuses and a final bonus. We don’t add all of the fund growth using regular bonuses. We hold some back and add it as a final bonus if the fund performance justifies it. This allows us to ‘smooth’ plan payouts so they don’t change significantly from year to year.

    In setting a final bonus, we group plans together by age and type and look at the fund performance for that group to decide a fair payout. We usually set bonus rates once a year, but we regularly review the rates we pay out and sometimes change them more often. This makes sure each group of policyholders continues to receive a fair share.

    What is smoothing and how does it work?

    Smoothing is a method of reducing the ups and downs in the value of your investment by paying out the returns through a system of bonuses. This is a special feature of with-profits.

    Smoothing works by holding back some of the returns from good times to help pay out bonuses in poorer times. Equally, losses made in poor times may also reduce gains in good times. In the long term we can only pay out what the fund’s assets achieve. We will do this by increasing guaranteed payouts when it is prudent.

    Why is the bonus rate different to the growth in the fund?

    Any regular bonus increases the amount we guarantee to pay out. The regular bonus we add takes into account the guarantees built up in the past and our expectation of future investment returns. When your plan ends, we will consider adding a final bonus if the fund performance has been greater than the assumptions made when setting regular bonus rates.

    How much is my plan worth?

    The bonus statement we send each year, tells you the bonuses we’ve added and the minimum amount we guarantee at maturity/retirement.

    If you want to know the current surrender or transfer value, please call us on:

    0370 333 1500

    Monday to Friday 8.30am - 6.00pm excluding Bank holidays.

    We may record or monitor calls for training and quality purposes.

    What guarantees does my plan have?

    Your plan benefits are guaranteed provided you maintain any regular payments. Guarantees may apply only at a particular date, for example the maturity date or retirement date. Most plans also have a guaranteed amount payable on death. These are not necessarily the same as the guarantees at maturity. The bonus statement will tell you if guarantees apply to your plan. Some of these may be valuable and you should make sure that you understand them before taking any action. You can find more information on some specialised types of guarantee below:

    Guaranteed annuity rates (on conventional with-profits self-employed or executive pension plans).

    Some pension plans include a guaranteed rate for turning the plan value into an income at retirement. These are probably better than can be obtained anywhere else.

    The guaranteed rates apply regardless of how much a plan is worth, and we still offer a favourable rate should you want to take your benefits early. Your bonus statement tells you the income we guarantee from your plan at the plan retirement date as well as the minimum age at which guaranteed rates apply.

    Mortgage endowment guarantees (on plans that have accepted all recommended premium increases)

    Some conventional endowment plans contain a review clause, the purpose of which is to monitor the performance of the plan and recommend necessary increases to ensure the plan remains on track. If all the recommended increases are taken up, then the plan is guaranteed to reach its target amount at the maturity date, subject to all premiums due being paid.

    Life cover

    A life plan will provide a guaranteed amount if you die before your plan ends.

    Waiver of payment cover

    You may have chosen to pay for cover to waive regular payments if you are unable to work through sickness or disability. See your plan documents for the exact details of the cover provided.

    How much might I get back when my plan ends?

    Your bonus statement shows the minimum guaranteed amount available at maturity if you continue making any regular payments. Any future regular or final bonus we add would increase the actual amount paid. We can provide an illustration based on current assumptions using different rates of investment return. These will give you a range of values for your plan using assumptions for investment growth and our expectation of future charges.

    If you have an endowment plan, we will send you an illustration each year showing you if it’s on track to meet the target amount at maturity. Find out information about the illustrations we send out on mortgage endowments.

    Mortgage Endowment

    When does my plan end?

    You can see this in the ‘Your plan details’ section of your bonus statement or if you have a mortgage endowment, this can be found in the ‘Your plan now…’ section of your plan update letter. Alternatively, to find out call us on:

    0370 333 1500

    Monday to Friday 8.30am - 6.00pm excluding Bank holidays.

    We may record or monitor calls for training and quality purposes

    Can I end my plan early?

    Yes. We’ll need the written instructions of all the plan owners and the plan documents. To make sure we only deal with the plan owners, we’ll also ask for evidence of identity such as a bank statement or copy driving licence. The confirming your identity leaflet will give you more information about this process.

    If you have a pension plan, you will normally have to wait until 55 (age 50 for offshore pension plans) before you can start taking your pension income. The guarantees applicable to some plans may not be available until age 60, so please check with us before making any decisions. If you belong to a pension scheme, you will need to deal with the scheme administrators or if this is your own plan, call us for more details of your options.

    0370 333 1500

    Monday to Friday 8.30am - 6.30pm and on Saturday 9.30am - 12.30pm, excluding Bank holidays.

    We may record or monitor calls for training and quality purposes.

    You may also want to consider the alternative choices available under your plan detailed in the Understanding your choices section.

    How can I get more information about my plan?

    If you want more information about the plan, please talk to your adviser or call us – we’ll be pleased to help. If you haven't got an adviser, here are details on how you can find one.

    0370 333 1500

    Monday to Friday 8.30am - 6.00pm excluding Bank holidays.

    We may record or monitor calls for training and quality purposes.

    How do I change my address?

    You can let us know your change of address by calling us or completing and returning the change of address form. If you are also changing your name, we will require proof of this.

  • Understanding your choices

    You 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]

    Does the plan still meet my needs?

    Your circumstances and needs may have changed since your plan started and you should also be aware that the investment strategy of the Zurich with-profits funds has changed over the years. Your adviser will be able to help you decide whether the plan still meets your needs.

    Like many other with-profits funds, the Zurich funds don’t invest in equities to the extent they did before the stock market falls in 2000-2002. Pension plans other than Esitran do not have any exposure to shares or property.

    We let you know each year how the fund is invested for your plan.

    Can I cash in my life plan without being charged a penalty?

    The guarantees on your plan apply at maturity, so if you end your plan early you won’t receive as much. However, we aim to pay a value that is fair to you and to the other policyholders remaining in the fund. There is no specific penalty for leaving early. Ask us for a value now and at maturity before you decide what to do. If you’re not sure, ask an adviser.

    Can I switch to a unit linked fund?

    No. Unit linked funds are not available on conventional plans.

    Can I stop making payments but still keep my plan?

    Yes. Contact us for an illustration of the reduction it will cause to your final plan value and the amount of life cover. You should note that if you decide to stop making payments to the plan, you won’t be able to restart payments at a later date.

    What happens if I miss payments?

    This depends on your plan terms & conditions. On most endowment plans, we set up the missed payments as a loan so the full amount of life cover can continue. The loan accrues interest at 11% each year, but can be repaid at any time. If you make payments net of tax (LAPR), you can only claim this relief if you pay the outstanding amount within 13 months. Any unpaid interest is added to the loan each year, and is repaid when your plan ends. If the surrender value is insufficient to cover the amount of the loan and interest outstanding, the plan will stop without a value and life cover stops.

    Can I transfer my pension plan to another insurer?

    Yes. We can let you know the transfer value if you contact us. Some conventional pension plans include valuable guarantees which would be lost if you transfer your plan to another provider. These include guaranteed growth until retirement date and in some cases a guaranteed rate which could give you a higher income from us than other providers. The bonus statement tells you when these guarantees are available. Make sure you understand what you could get back before transferring your plan elsewhere and take advice if you're unsure.

    You should also take account of any set up charges for a new plan. We recommend you seek advice if you are considering this option.

    Can I sell my endowment plan?

    Some companies buy endowment plans, so it may be possible to sell the plan and receive a greater amount than the cash-in value. Other types of plan cannot normally be sold. You can find more information on the Selling My Endowment website at or by phoning them on 01244 615 608. If you give the plan details to Selling My Endowment, they will send them to their member companies to see if any of them can make an offer better than the cash-in value. [Zurich is not responsible for the content of external websites]

    Before deciding whether to accept any offer you should check what the relevant company's requirements are and how long it might take for them to pay out the money. You may need to pass over the original plan documents. We strongly recommend you speak to your adviser before taking any action.

    Can I take a loan against my plan?

    Some plans allow you to borrow using the plan surrender value as security. This allows you to maintain the life cover (less the loan and interest outstanding). The current interest rate is 11% each year and this rate is fixed for the duration of the loan. Interest is payable yearly or can be added to the loan. The loan can be repaid in full or part at any time or will be deducted when your plan ends. If you do not keep up your regular payments, your plan could stop without any value.

    How can I get more information?

    If you want more information about the plan, please talk to your adviser or call us - we'll be pleased to help. If you haven't got an adviser, here are details on how you can find one.

    0370 333 1500

    Monday to Friday 8.30am - 6.00pm excluding Bank holidays.

    We may record or monitor calls for training and quality purposes.

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