How do With Profits funds work?

We will invest the money you use to buy our With Profits Annuity in the With Profits section of our UK Long Term Fund. This typically invests in a mix of UK and overseas shares, fixed interest securities and UK commercial property.

Bonuses

With Profits investment returns are credited in the form of bonuses, which we apply on your individual ‘policy alteration date’ (normally the anniversary of the start of your annuity).

There are two types of bonuses:

• Annual bonus - cannot be withdrawn once added (other than by the effect of the ABR), and
• Temporary bonus - payable for one year and can be changed or withdrawn at any time.

Your pension income

As the income from our With Profits Annuity is linked to investment returns, you could receive a higher overall income than from our Pension Annuity. However, like the stock market, your income will fluctuate and cannot be guaranteed, so it could also fall below the level of our Pension Annuity. 

With Profits bonuses are paid depending on investment performance and could increase your income from one year to the next. If we don’t declare a bonus or we declare a reduced bonus, the level of your income could fall.

Smoothing

When setting bonus rates we aim to ‘smooth’ returns to reduce fluctuations to your income. Smoothing involves putting aside profits during years of good returns and using them to ‘top-up’ bonuses in years when returns are lower.

Why invest in Legal & General's With Profits?

Our With Profits investments are managed by Legal & General Investment Management (LGIM), which is part of the Legal & General Group. At the end of 2010 we had approximately 660,000 With Profits customers and over £15 billion of funds under management.