Investors should beware of high headline bonus rates when investing in with profits bonds according to Bath IFA Chartwell Investment Management.
In Chartwell's eighth edition of its 'With Profit Bond Guide', associate director Patrick Connolly says too many private investors are attracted by a high headline bonus rate, but this may not be the best product.
Connolly says a better guide to the best bonds would be to look at overall return over five years or more.
He says: "A current bonus rate of 7 per cent looks far more appealing than a rate of 6 per cent but we would stress that the financial strength of the company and its past performance in with profits funds deserve far more attention than the headline bonus rates, often designed solely to entice funds from investors."
The guide says that current annual bonus rate, terminal bonus history, allocation rates, charges, financial strength, past performance, asset allocation and commission structure should all be taken into account.
Top ten recommendations are Prudential, Norwich Union, Scottish Widows, Scottish Equitable, CGU Life, Clerical Medical, Scottish Mutual, Royal & SunAlliance, Legal & General and Friends Provident.