Glossary

Actuary

This is the appropriately qualified person holding the Senior Insurance Manager Functions of Chief Actuary and With-Profits Actuary (as approved by the Prudential Regulation Authority). The actuary is responsible for undertaking the Society’s investment, solvency and asset share calculations, and to advise the Committee on its compliance with the PPFM.

AFM

Association of Financial Mutuals – is the trade body that represents mutual insurers, friendly societies and other financial mutuals in the UK.

Annual Bonus

This is the bonus we may add to your policy each year. It is sometimes called a reversionary or regular bonus.

Assets

These are the investments held within the Society’s long-term business fund.

Asset Share: What is an asset share?

This is the term used to describe your fair share of the underlying assets in the Society’s long-term investment fund. It is calculated by taking the premiums paid, deducting the expenses of setting up and administering the policy, and increasing the value by the interest earned on the fund from year to year, less tax where appropriate. Please refer to the PPFM for further details.

Bonuses

Bonuses are normally added to policies each year (depending on actuarial advice) based on the sum assured or capital balance. These bonuses, which are not guaranteed, are a percentage of the sum assured figure, and vary dependent on the policy type.

Committee of Management (the ‘Committee’)

This is the governing body of the Society, elected by our voting members.

Endowment

A policy combining life assurance and investment under which the sum assured is paid at a pre-agreed date, or on the death of the policyholder if earlier. A pure endowment policy will not have life assurance.

Equities

Another word for “Share” A shareholder’s equity is the value of the shares they hold.

Ethical

We seek to adopt an ethical approach to investing and it is our policy not to invest knowingly or directly in industries relating to armaments, tobacco, gambling or pornography.

F.C.A :- The Financial Conduct Authority

The FCA regulates firms providing services to consumers and maintains the integrity of the UK's financial market. It was formed as one of the successors of the FSA from 1st April 2013.

Final Bonus

This is the bonus that we may add at the end of the investment. It is sometimes called a terminal bonus.

FSCS :- Financial Services Compensation Scheme

The FSCS is the UK’s statutory fund of last resort for customers of authorised financial services firms. This means that the FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable to pay claims against it.

Fund

This is all the money that has been contributed to our long-term business fund, which is held in a variety of assets. 

HMRC :- Her Majestys Revenue and Customs

HMRC is a non-ministerial department of the British Government primarily responsible for the collection of taxes and the payment of some forms of support.

Interim Bonus

This is the bonus we will add when your policy matures or is surrendered part way through a bonus year. 

IFA :- Independent Financial Advisor

Professionals who provide independent advice on financial matters. 

Illustration

 A quote – an example to show possible returns and sum assured figures. 

Investment

The investing of money or capital in order to gain profitable returns, as interest, income or appreciation in value. 

Market Value Reduction

This describes an adjustment to the value of your policy in adverse investment conditions, in order to ensure you receive your fair share of the fund on surrender or encashment.

Maturity

The term used when the policy has run its full term and the investment is paid out.

Maturity Date

The date that an insurance policy or other financial contract finishes or "matures", and the proceeds, sometimes known as the maturity value, become payable.

Mutual

A Mutual has no shareholders but instead is owned entirely by its policyholders known as members.

Mutual Capital

This term describes the value of the assets in the fund, which have been built up over time and are not part of an individual’s asset share.

MVR/MVA :- Market Value Reduction/Adjustment

This is a mechanism used to ensure that policy withdrawals/surrenders are reasonable in relation to the policy’s fair entitlement to the assets of the with-profits fund. 

P.R.A :- the Prudential Regulation Authority

The PRA is a UK financial services regulator formed as one of the successors of the FSA. It carries out regulation of financial firms from 1st April 2013.

Premium

The monetary amount paid for a policy. The payment a policyholder makes in return for insurance cover / or an amount deposited to a savings plan. Usually paid monthly, annually or as a single lump sum.

Regular Savings Plans

A policy to which you make regular payments for a set term and amount which is chosen at the outset. Premium frequencies can be Monthly or Annually. Our Regular Savings Plan provides a Sum Assured figure to which bonuses are added each year (bonuses are not guaranteed).  

RFA :- Restricted Financial Adviser

Professionals who provide advice on financial matters but from a single or limited number of products and/or providers.

Smoothing

This is the term used to describe the practice employed to make your return more even. Smoothing is a process which applies to with-profits policies to ensure that the amounts paid out do not vary excessively from year to year. Please refer to the PPFM for further information.

Sum Assured

This is the amount shown on your illustration and is the guaranteed minimum you will receive on maturity and death (depending on the type of policy), providing you continue to pay all the premiums due.

Surrender

To cash in your policy before the end of its term. 

Term

The length of time a policy is to run for. 

Terminal Bonus

An additional final bonus may be added to the policy upon encashment dependent on investment returns and the length of time the policy is held.

With Profits

A type of investment plan sold in the UK in which extra amounts may be added to the main benefit (known as the sum assured) to reflect profits earned during the course of the contract. Regular or "reversionary" bonuses may be added, usually each year, and once declared are guaranteed. 

A final or "terminal" bonus may be added when the policy becomes payable. With-profit funds are typically invested in a mixture of equities, property and fixed income investments. Under poor stock market conditions a “Market Value Adjustment” (MVA) may be applied to the value of the policy if it is surrendered before the maturity date.

What is a with-profits policy?

A with-profits policy shares in the profits of the Society through the addition of bonuses. The amount of bonus will depend on how the investments in the fund have performed while you have been paying premiums into it. The amount of bonus will also depend on the allowance we make for the expenses of setting up and running the policy. The Society is a mutual organisation, which means that there are no shareholders. The Society is, therefore owned by its members, which includes with-profits policyholders.

The following policy types are classed as with-profits:-

  • Tax Exempt Savings Plan (TESP) - with or without life cover
  • Regular Savings Plan
  • Investment Bond
  • Income Bond
  • Pension Bond
  • Individual Savings Account (ISA)
  • Junior Individual Savings Account (JISA)
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