According to with-profits providers, investors should not be told how their with-profits bonuses are calculated amid fears it will destabilise the industry. Disclosure was previously at a firms' discretion, but following new rules from the Financial Services Authority on with-profits transparency, firms now have to forward details of their accounts to interested independent financial advisers, disclosing the payouts they are making on their policies, together with terminal bonuses and market value adjustments.
Providers now fear that they will eventually be forced to disclose asset shares on policies, which are used to calculate bonus payments. This would show policyholders how with-profits payments are 'smoothed' on an annual basis, and would also give them the chance to leave when smoothing is working in their favour, de-stabilising the funds.
If a large amount of investors withdraw from a fund at the same time, companies reserve the right to 'un-apply' the smoothing process to save the assets of the fund.
Our view
is not and has never been a 'fan' of 'with profits' funds as they are not transparent and many advisers and providers hide behind a 'smokescreen' of smoothed investment returns when in fact all they are is a glorified volatile stockmarket investment.