With profits personal pensions
With profits personal pensions
Traditional with profits personal pension
Contributions are invested in a with profits fund. Each year bonuses are added to the investment, either by an increase in the price of units or by allocation of extra units.
Once declared these bonuses cannot be removed and are seen as one of the attractions of with profits investments. This annual declaration of bonuses is known as 'smoothing', and protects the pension investor, to some extent, from the ups and downs normally associated with stock market investments.
Unitised with profits personal pension
Contributions are used to buy units in an insurance company's with profits fund. The value of these units will increase annually, by an amount that depends on the investment performance and profits of the insurance company.
On maturity a terminal bonus may also be awarded. Unitised with profits plans are seen as a halfway house, mixing together the safety of a traditional with profits fund with the potential of unit-linked investment achieved with some risk, whilst not subjecting the investor to the full risk of stock market investments.
Related Links
Looking to start investing in a pension? Why not visit our pensions best buys to make sure you get a good deal?
If you are looking for annuity information and rates, visit our annuities section for best buys and guides.
