It’s a way of saving regularly or investing a lump sum, using a pension or life insurance policy designed to provide a minimum guaranteed return after an agreed period.
Your money is ‘pooled‘ together with other policyholders and invested in your policy’s investment fund. The fund is linked to the stockmarket, investing in a mixture of shares, fixed interest securities, such as loans to the government or large corporations, and cash deposits. A technique known as
is used, which aims to even out some of the short term ups and downs of the stockmarket.
Any profits from investing in the fund may be distributed to the fund’s policyholders in the form of one or more bonuses. The amount of profit generally depends on how well the investment fund performs over the term of the policy.