Legal & General’s with-profits funds have seen a near five-fold improvement in their performance this year.
The funds generated pre-tax investment returns of 15.3 per cent for 2016, up from 3.1 per cent in 2015 and 10 per cent in 2014.
The company added fewer bonuses to its with-profits policies last year, however. The £316 million it added was lower than £366 million figure for 2015 and the £387m added in 2014.
This reflects “a gradual reduction in the number of customers as policies continue to mature” the firm says.
The with-profits fund was closed to new business in early 2015 after sales took a hit from the RDR.
L&G managing director of savings Jackie Noakes says: “[Today’s result] clearly demonstrates the benefits for our existing customers of remaining invested in a fund with a broad range of assets. It also means that our with-profits customers continue to see steady growth on their investments over the long-term, well in excess of inflation.”
The company notes, however, that it “may apply an early surrender charge and/or market value reduction if a customer cashes in all or part of their policy or moves out of with-profits. This would reduce the amount paid.”
Over the last ten years, L&G’s with-profits have returned an average of 5.9 per cent, rising to 8.6 per cent for the last 25 years.
The firm’s with-profits growth bonds currently have a 12 per cent allocation in commercial property and 30 per cent in overseas shares.
For with-profits pensions, the commercial property allocation is 9 per cent, 23 per cent is in overseas shares, and 53 per cent in fixed interest securities.