Money Advice Service

If you get a letter saying your with-profits fund is closing, don’t panic – it just means new people can’t buy in. Your investment should stay mostly as it is, but there are some things you should know about owning a with-profits policy in a closed fund.

Understanding fund closures

Why a with-profits fund might close

There are a few reasons why a fund might stop selling new policies. For example:

  • The fund isn’t performing well.
  • The company can’t attract many new customers.
  • The company isn’t making enough profit on new policy sales.
  • Another insurance company is taking over the fund.

What happens to closed funds?

When a fund closes, it’s only really closing to new investors – your money can stay in the fund with the potential to earn bonuses in the future.

If your fund is going to close, the insurance company will write to you with the details.

They must tell you:

  • Why they’re closing the fund
  • What closure means for you
  • What your options are.

How do closed funds perform?

Closed funds don’t necessarily do better or worse than open funds.

But the manager of a closed fund might switch from riskier investments – like shares – to more stable ones like bonds.

Deciding what to do

If your fund has valuable guarantees – such as a generous lump sum if you hold on to the policy – you should consider leaving your money where it is.

But if you think your closed with-profits fund isn’t doing as well as it should and you could earn more by investing somewhere else, ending your policy early might be the better move.

Before you decide, learn more about your options by speaking to a financial adviser or reading our guide to Ending your endowment and whole of life with-profits policy early.

Are closed with-profits funds still secure?

All funds – whether open or closed – are regulated by the Financial Conduct Authority.

One of their main roles is to make sure you’re treated fairly. If you have a problem, read our guide on how to Sort out a money problem or make a complaint.

Get an overview of With-profits funds.

If your policy is transferred to another insurer

If another company buys your with-profits fund – or buys your insurer – your policy will be transferred to the new company.

In either case, your insurance company will write to you and explain the details.

There’s no need to worry about transfers – there are laws and regulations in place to make sure that you won’t get a worse deal just because your policy has changed hands.

This article is provided by the Money Advice Service.