Rising payouts are finally rewarding investors who have stuck by their with-profits bonds through th...
Rising payouts are finally rewarding investors who have stuck by their with-profits bonds through the recent lean years, a survey by Investment, Life & Pensions Moneyfacts has revealed.
The survey examined the latest with-profits bond returns over various periods based on a single premium of £25,000.
It found that over the short term with-profits bond payouts have continued to improve, with the average surrender values after two, three, four and five years all higher than at the corresponding point a year ago. The average with-profits bond has now produced growth of 21.3% and 35.5% for its three and four year payouts respectively.
Returns drop slightly over five years, reflecting the more difficult investment conditions endured during this period. Nevertheless, the average five-year bond is still showing a 24% return.
The survey showed that an individual who invested £25,000 into an average with-profits back in February 2002 and decided to surrender their policy three years later would have received £25,655, but if they had kept the bond for a further two years it would now be worth £30,999. However, this is still significantly lower than the increase in the FTSE All-Share index (32.44%).
Harry Katz, principal at IFA firm Norwest Consultants, commented: "Undoubtedly there are some with-profits that are okay but it is still a very opaque product.
"With what is available today, it's a pretty poor show if an investment advisor can't think of anything better than a with-profits fund."
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