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SL Investment Management publishes their UK With-Profits Review for 2013

“SL Investment Management publishes their UK with-profits review for 2013, highlighting the impact on endowment payouts following the recent spate of Life Company bonus declarations.”

At the start of each year, UK Life Companies judiciously announce new bonus rates on their range of with-profit products. These declarations are important as they impact directly on the endowment payouts policyholders will receive on policy maturities in that year, and for many policy holders their ability to repay the capital on their outstanding mortgage.

In March 2013, SL Investment Management published their annual With-profit endowments report, summarising the Life Company declared with-profit returns for 2012, and the resulting key changes to endowment payouts for 2013. This is a precursor to the much acclaimed Money Management report into With-profits, published in April of each year.

The SL Investment Management report highlights that the listed Life Companies have on average achieved With-profit returns1 of 8.7% in 2012. This compares favourably to an equivalent balanced managed fund, where the typical return2 is quoted as 8.4%.

Dan Johnston of SL said, “Many commentators fail to acknowledge the continued good performance of UK with-profit funds, focussing instead on the annual changes in reversionary bonus rates. However, the 2012 result once again demonstrates the ability of with-profits funds to outperform equivalent balanced managed portfolios. In fact, they have done this consistently over much of the last 20 years”.

Other key points highlighted by SL Investment Management3 include:

  • The average payout on a 25 year policy is down from £30,896 in 2012 to £29,393 in 2013.
  • This represents a typical decrease in payout of £1,503, despite the fact that the listed Life Offices have achieved average with-profit gross returns of 8.7% in 2012.
  • However, average 25 year payouts still represent a 5.0%p.a. return on premiums paid throughout the life of the policy. This compares favourably to a typical savings account which SL Investment Management quote as returning 2.8%p.a. over a similar period.

Dan Johnston commented, “Considering the healthy with-profit returns experienced in 2012, it is disappointing that these are yet to translate into increased endowment payouts today. Nevertheless, with-profit funds continue to demonstrate their ability to deliver good comparable underlying returns, and we believe that this bodes well for the future prospects of products invested in with-profits.”

For more information on how you can realise additional value from your endowment, please call 0800 919 021.

1 Life Company declared gross with-profit returns for 2012.

2 Index used; “ABI UK – mixed 20%-60% Shares”.

3 Comparing actual maturity payouts for 25 year term policies maturing at 1st March 2013, for a male aged 30 next birthday and a monthly premium of £50.

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