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Traditional With Profits policy

These are medium to long-term policies investing in long-term investment funds offered by insurance companies. The policies range from investment bonds and endowments to whole-of-life and pension policies. They provide a guaranteed minimum fund value or pension, and policyholders receive the ‘profits’ of the business in the form of bonuses after the running costs are deducted. The size of the bonuses depends on fund performance, the running costs, and the use of smoothing.