Products outperformed by notice savings accounts and other types of investment fund
Published: 05/07/2010
WITH-PROFITS policies are struggling to hold their own against other types of investment.
According to research by Money Management magazine, a with-profits endowment policy into which someone had paid £50 a month for 10 years would have been worth an average of £6,548 at the start of May.
The investment would have produced a higher return than if the same money had been paid into an instant-access account, but would have been outperformed by a notice savings account, tracker fund and balanced managed fund.
UK tracker funds performed the best over the period, returning an average of £7,748, while balanced managed funds returned £7,693. A 90-day notice account returned £6,666, on average.
The research also found there was considerable variation in the performance of different with-profits funds, with Sheffield Mutual producing the strongest return at £11,085, beating both the best balanced managed fund and best UK tracker, which returned £10,250 and £9,751 respectively.
With-profits funds performed slightly better over 20 years, returning, on average, £21,372, managing to beat the returns available from instant-access and notice accounts, but still trailed behind other types of investment fund.
Janet Walford, editor of Money Management, said: “Without doubt, payouts from with-profits policies have been falling steadily in recent years due to volatile markets, low interest rates and the burden of meeting high guarantees.
“But tax-free endowment policies can still generate a good return.”
From The Press and jOURNAL published on 05/07/2010
