Press releases


Tim Sheldon, With Profits Actuary, Legal & General Assurance Society
Tim Sheldon
With Profits Actuary, Legal & General Assurance Society

21 February 2013

Tim Sheldon, With Profits Actuary, Legal & General Assurance Society
Tim Sheldon
With Profits Actuary, Legal & General Assurance Society

Legal & General today announced double digit growth (before tax) with a 10.6% return on the assets held for their with profits policyholders (12 months to 31 December 2012).

The company added bonuses worth £471 million to its with profits policies in 2012, up on the previous year (£459m in 2011). The increase was mainly due to a rise in the number of customers whose with profits policies matured over the year to December 2012.

Long-term returns well above inflation…

Over the past 10 years the assets held on behalf of Legal & General’s with profits policyholders have generated an annual return of 7.7% before tax. This has exceeded the return on an average balanced fund (7.3% per annum, before tax) and is well ahead of the average inflation rate of 3.3% per annum over the same period, based on the Retail Prices Index (RPI).

With profits long term returns

Legal & General with profits return has exceeded RPI.
InvestmentReturn per annum over 10 yearsReturn per annum over 25 years
 Legal & General with profits7.7% (before tax) 8.8% (before tax)
 Average balanced managed fund*7.3% (before tax) 7.6% (before tax)
Retail Prices Index (RPI) Inflation3.3% per annum 3.5% per annum

* Source: ABI UK Balanced (mixed investment 40-85% equity) fund

Over 25 years the assets held on behalf of Legal & General’s with profits policyholders have returned 8.8% per annum before tax, which also exceeded the average for the balanced managed fund sector (7.6% per annum before tax) and is ahead of average inflation (3.5% per annum measured by the RPI).

Commenting on our 2012 with profits performance Tim Sheldon, Legal & General’s With Profits Actuary said; 

“The strong investment return generated for Legal & General’s with profits customers in 2012 demonstrates the benefits of investing with a leading with profits provider.

Our active management of risk and a balanced asset mix are key reasons for our with profits fund outperforming many of our competitors. This year's results have produced double digit returns demonstrating the advantage of the freedom to capitalise on opportunities to boost investment returns for our policyholders.

Whether invested in a with profits bond, pension or endowment the long term returns delivered for our customers have beaten inflation.

We believe with profits remains a good choice for investors seeking steady growth from a spread of investments over the longer term and the additional benefit of some downside protection."

Endowment mortgages…

For customers whose endowment mortgages are not yet at maturity, regular bonus rates are being maintained at current levels.

For the endowment mortgage example shown below, the maturity value represents a return net of tax and charges of 5.3% per annum and is ahead of inflation over the same period (3.5% per annum).

25 year mortgage endowment maturing on 1 March 2013: (male aged 29 at entry)

Above inflation return for 25 year endowment mortgage maturing on 1 March 2013

Maturity value for a male age 29 at entry
PaymentTotal paidValueGainReturn net of tax and charges
£50 per month level premium £ 15,000 £ 30,789£15,7895.3% per annum 

25 year endowment mortgage maturities set to peak this year...

The number of Legal & General mortgage endowment policies reaching maturity is set to peak in 2013 at approximately 46,000 endowments.

Many policies were taken out 25 years ago to take advantage of Joint MIRAS tax relief for unmarried couples before it was ended in August 1988.

Next year (2014) we expect 30,000 mortgage endowment maturities.

With Profits Bond investors...

£10,000 invested in a With Profits Growth Bond 10 years ago has a cash-in value of £17,202 (as at 22 February) – an increase in value of 5.6% per annum, net of tax and charges.

Notes to editors

The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.

Legal & General has approximately 550,000 with profits customers.

The return generated in 2012 is on total assets backing with profits policies and is stated pre-tax and charges. Returns generated for the assets underlying individual products may differ from this value.

  • Past performance is not a guide to future performance.
  • The value of investments may fall as well as rise and investors may get back less than the amount originally invested.
  • What a customer gets back depends on future bonus rates, which may change.
  • We may apply an early surrender charge and/or market value reduction if a customer cashes in all or part of their policy or moves out of with profits. This would reduce the amount paid.

The asset allocations for With Profits Growth Bonds, Endowments and Pensions at 31.12.2012 were as follows:

Asset allocation by product type

Asset allocation for with profit growth bonds, with profit endowments and with profit pensions.
Asset allocation as at 31.12.2012With Profit Growth BondsWith Profits EndowmentsWith Profits Pensions
UK shares19% 19% 16%
Overseas shares