Jargon buster

Closed fund
A with-profits fund which no longer takes on new business.

Conventional with–profits fund
A traditional fund which is not unitised – see Types of with-profits fund.

Excess surplus
The amount of capital in a with-profits fund which is not needed as working capital, and can be distributed to policyholders and shareholders.

Guaranteed Annuity Rate
At a certain maturity date your pension provider will provide an annuity at a guaranteed rate.

Income withdrawal
A type of unsecured pension. Your pension fund remains invested. You withdraw your income directly from your fund within guidelines set by HM Revenue & Customs.

Inherited estate
Part of a with-profits fund which is working capital to help with smoothing and investment flexibility and is above what the firm needs to pay out in benefits and charges – see Reattribution.

Market Level Adjustment
Market Value Adjustment
Market Value Reduction
In a unitised with-profits policy the amount an insurer will reduce the unit value if a policy is cashed in early. In a conventional with-profits policy the amount that a firm may reduce the return if the policy is cashed in early.

MVR-free dates
When you can cash in your policy early or switch from with profits funds without incurring a market value reduction.

Policyholder Advocate
A person appointed to negotiate with the firm on behalf of the policyholders during a reattribution process.

Premium
The amount you pay in to your policy. This can be a one-off or monthly payment (single or regular premium).

Reattribution
The result of a negotiation which exchanges policyholders' rights to a future share in the distribution of the inherited estate for an earlier one-off payment.

Regular bonus
A bonus paid to your policy each policy year which becomes guaranteed once it is paid. Also known as a reversionary or annual bonus.

Smoothing
A method used to help reduce volatility in the fund by balancing out the profit made in good years against losses made in bad ones – see Types of with-profits fund.

Terminal bonus
Also known as a final bonus. The bonus calculated and added at the end of your policy.

Unitised with–profits fund
A with-profits fund that is sub-divided into units.

With-profits fund
This is a fund where your premiums for your with-profits policy are pooled with other with-profits policyholders. The fund invests in areas such as stocks and shares, property, deposits and gilts (government bonds).

With-profits policy
Policies such as a pension, endowment, bond or whole-of-life policy which is invested in a with-profits fund.