With-profits funds focus on terminal bonuses

The increasing emphasis on terminal instead of annual bonuses by UK with-profits providers is part of a strategy to increase total returns, rather than being part of an attempt by companies to offload risk to policyholders, according to senior industry figures.

Prudential saw total investment returns increase by 12.7% on its with-profits funds in 2006 but for the fourth year in a row, failed to increase its annual bonus rates. Annual bonuses are guaranteed whereas terminal ones vary in line with

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