With Profit Bonds Not All The Same

by Arthur Childs, Chartered Financial Planner

With Profit Bonds were a very popular form of investment, and over the last three decades many hundreds of millions of pounds were invested with the various life offices that offered such bonds. 

Their popularity has not only waned but has turned into reverse, however, as the long bear market of 2000 to 2003 took its toll and product providers were forced to slash bonus payments, introduce large Market Value Reductions (MVRs) and, in many cases, withdraw from the market and close their funds.

Many investors in With Profit Bonds now find themselves in the unenviable position of holding an investment that is not growing in value, with no real prospect that the situation will change, and yet they will suffer a heavy penalty if they attempt to move their investment elsewhere.

Holders of existing With Profit Bonds are encouraged go to their advisers to ask for a review of their bonds to see if they are still a suitable investment for them or whether their money should be reinvested elsewhere. We are going through a process of reviewing all existing With Profit Bonds held by our clients, however this will take some time to complete and if you would like to request a review now please do let us know.

Some With Profit Bonds, however, continue to perform well and the predictions of the complete death of such bonds have been exaggerated.  There is now a small but noticeable increase in the number of new investments being made into such bonds with a small number of product providers who have shown that they can manage their With Profit Funds successfully.

Far from the with profits process being completely discredited, one of the fastest growing types of annuity is now the with profits annuity.

We have updated the section of our website which deals with the subject of With Profit Bonds. If you already have an investment in one or more With Profit Bonds the section on With Profit Bond Reviews might be of particular interest to you. If you think that a With Profit Bond might be a suitable investment for you then you will find some useful background information to help you decide and by all means contact us for an illustration.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances.  If you are in any doubt as to whether an investment in a With Profit Bond is suitable for you, then you should discuss the matter with a suitably qualified independent financial adviser such as ourselves. If you would like to have a review of an existing With Profit Bond please ask your usual Arch adviser, telephone 0845 3700 661 or email enquiries@arch-fp.co.uk.

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