Consumer-friendly principles
and practices of
financial management (CFPPFM)
Your guide to how we manage our OneFamily (EM) With Profits Fund
- Protected Investment Bond / Protected Loyalty Bond
Contents
What is our OneFamily (EM) With Profits Fund?
2
3
Summary
3
How the Fund invests
4
Sharing performance
4
Guarantees
4
Smoothed returns
4
What affects the overall performance of the Fund?
5
Investment returns
5
Asset mix
5
Expenses
6
Other factors
6
How is the Fund managed fairly and effectively?
7
Decision making
7
Investment strategy and additional assets
7
Closing the Fund to new business
7
The Protected Investment Bond and Protected Loyalty Bond
8
Summary
8
What are the guaranteed benefits?
8
What affects the amount I get back?
8
Smoothing returns
10
Further information
11
About this guide
Here you’ll find the main points you
need to know about investing in our
OneFamily (EM) With Profits Fund,
along with important information on
how our Protected Investment Bond and
Protected Loyalty Bond work.
You’re likely to need this guide in the
future, so please keep it safe with your
other Bond documents.
In this document we may refer to the
Onefamily (EM) With Profits Fund
as either the Fund or the With
Profits Fund.
Want to know more?
If you need more information about your
Protected Investment Bond or Protected
Loyalty Bond, you’ll find it in your Key
Features booklet or in the other literature
you received when you took out
your Bond.
Please note – the way we manage our
With Profits Fund may change in the
future. We’ll let you know if we make any
changes that might significantly affect
your investment.
What is our With
Profits Fund?
Summary
Our With Profits Fund is an investment
fund. We form the Fund by combining
your money with other investors’ money,
and we manage it for you.
Policies investing in the Fund are
medium to long-term investments. So
you should ideally keep your investment
for at least 10 years.
The Fund provides some stability
against the short-term ups and downs
of the investment markets. It does this
by ‘smoothing’ returns (see page 4)
and pooling your money with other
investors’ money. In this way, everyone
shares in the profits or losses of
the Fund.
3
How the Fund invests
Sharing performance
Our With Profits Fund can invest in a
wide range of investments.
These include:
The Fund’s performance is shared
between you and other policyholders in
different ways, depending on the type of
policy you hold.
For single-premium With Profits policies
that started after 31 October 2006,
the performance is shared out through
changes in the price of units allocated to
each policy. This applies to the Protected
Investment Bond and the Protected
Loyalty Bond.
• fixed interest securities and
government bonds
• the shares of UK and
overseas companies
• property
For all other With Profits policies, the
performance of the Fund is shared out to
policyholders through bonuses.
• cash
• other investments such as
currency, commodities or
structured investments
Guarantees
Unlike many stock market based
investments, policies investing in our
With Profits Fund guarantee you’ll get
back at least a certain amount of money.
You can find out more in page 8 of
this guide.
• our own business activities
involving the additional assets
of the Fund (see How is the Fund
managed fairly and effectively?
page 7).
Smoothed returns
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The investment returns the Fund
Different policies in the Fund invest
achieves will vary over time.
There
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might be periods when investments do
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very well, but others when they may
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perform
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uses a process known as smoothing to
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What affects the
overall performance
of the Fund?
Investment returns
Asset mix
The investment returns the Fund’s assets
earn, after any tax has been paid, will
have the biggest impact on the Fund’s
performance. Returns on company
shares are more variable than those on
other assets, because they are higher risk
investments. Their values tend to go up
and down more than other assets, such
as government bonds, or cash, which
can be less volatile. However, looking
back, company shares have tended to
provide better returns than cash over
the long term.
Because the investment performance
of different types of assets may vary
considerably over time, the overall
performance of the Fund will depend on
the mix of assets it holds. However, we
manage the Fund by notionally allocating
different proportions of each asset class
to each group of policies, depending on
the type of policy. We then attribute to
each policy the investment return earned
by these assets.
Please remember, past performance isn’t
a reliable guide to future results. The
value of your investment may fall as well
as rise, and you could get back less than
you’ve paid in.
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We regularly monitor the asset mix for
the Fund, and for different groups. We’ll
change the asset mix, depending on:
• the total amount of policy guarantees,
and when these guarantees are likely
to arise
• our view of investment market
conditions
• the overall financial strength of the
Fund (in other words, the size of
theassets over and above what’s
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needed to meet
policyholder benefits
and cover other business risks).
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Expenses
The expenses of managing the Fund are
paid for out of the Fund’s assets.
These expenses will typically cover:
• the costs of managing the Fund
• the ongoing costs of
administering existing policies
invested in the Fund
• the costs of setting up new
policies invested in the Fund
• the costs of investing the
Fund’s assets.
6
For some policies, we cover these
expenses by making specific charges
against each policy. For others, we allow
for the expenses in the returns allocated
to each policy.
Other factors
The Fund’s performance can also be
affected by other business risks the Fund
supports – for example, the costs of
meeting any investment guarantees or
providing life assurance. Profits or losses
arising on policies within the Fund that
are not ‘with profits’ can also affect the
Fund’s performance.
How is the Fund
managed fairly and
effectively?
Decision making
We have a framework to ensure we
manage the Fund fairly and effectively,
and in keeping with the regulations of
the Financial Conduct Authority (FCA).
We produce a document called the
Principles and Practices of Financial
Management (PPFM), which gives
detailed and technical information
about how we manage our With
Profits Fund.
A sub-committee of the Board of
Directors meets regularly to review the
Fund’s progress, and to make sure it’s
managed in keeping with the PPFM.
This sub-committee includes nonexecutive members and the With Profits
Actuary, who is specifically appointed
under FCA Regulations, to give advice
to the Board of Directors and ensure
that bondholders are treated fairly.
Every year, the Board of Directors and
the With Profits Actuary produce a
report for bondholders, confirming that
the With Profits Fund has been managed
in keeping with the PPFM.
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Investment strategy and
additional assets
The investment strategy for the Fund
is the responsibility of the Board, but is
managed by the Board sub-committee,
who recommend how much of the
Fund to invest in each type of asset. The
investment strategy also takes account
of the ‘additional assets’ in the Fund.
These are the assets over and above
those needed to meet policyholder
benefits. We use them to cover business
risks, the cost of providing guaranteed
benefits, and the costs of any smoothing
– also to finance setting up new policies.
The additional assets are not owned by
any particular type of policyholder, and
we don’t aim for them to be a particular
size. However, the Board of Directors
will review the Fund’s progress every
year, and confirm there aren’t excess
additional assets. If we find that the Fund
does have excess additional assets, the
Board may consider how we could use
some of them to improve payouts to
existing policyholders.
Closing the Fund to new policies
If the way we manage our With Profits
Fund changes in the future, we’ll update
We will keep the Fund open to new
the PPFM, and let you know about any
policies, as long as we expect them to be
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profitable and they’re withinInbox
the Fund’s
your investment.
solvency tolerance. If we were to close the
Fund to new policies, we would inform all
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explaining the
likely impact
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on the Fund, and any changes needed
to the PPFM. We would also submit a
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7 Fur
The Protected
Investment Bond and
Protected Loyalty Bond
Summary
The Protected Investment Bond and
the Protected Loyalty Bond are types
of policies known as Single Premium
Unitised With Profits Policies.
When you invest in either the Protected
Investment Bond or the Protected
Loyalty Bond, we allocate a certain
number of units to your Bond. We use
these to calculate what you’ve invested
in your Bond, and its value. We aim to
increase the value of your Bond over
time by increasing the price of the units.
Your return on your investment will
depend on the value of the units when
you cash in your Bond, after allowing for
any investment guarantees or smoothing.
What are the guaranteed
benefits?
On the 5th, 10th or any subsequent 10th
anniversary, you can cash in your Protected
Investment Bond or Protected Loyalty
Bond and receive at least your original
investment, less any withdrawals you’ve
made – even if the Fund has fallen in value.
A guarantee also applies if you die at any
time while your Bond is in force. If you’re
the sole bondholder, your estate will
receive the greater of:
8
• 101% of the units notionally allocated
to your Bond on the day before your
death, calculated at the unit price on
the day we’re told about your death, or
• 101% of your original investment, less
any withdrawals you’ve made.
What affects the amount I will
get back?
This section describes the amount
you get back, before allowing for any
additional assets we may use to improve
payouts to existing policyholders.
(You’ll find more information on
additional assets in the previous section.)
The amount you get back will depend on
the value of the units when you cash in
your Bond.
Each week, we calculate the price of the
units, which reflects:
• the investment performance of
the underlying assets
• the annual management charge
and charges for guarantees
• any miscellaneous profits or
losses generated by the overall
With Profits Fund
• taxation.
Here’s a little more
information about the factors
affecting the price of the units.
Investment performance
Your Bond currently invests in the Insight
Investment Global Absolute Return
(GAR) fund. If we need to change this
in the future, we’ll let you know, and tell
you why.
The Insight Investment GAR fund is a
UCITS III structure, and derivatives may
be used to meet its objectives.
The composition of our With Profits
Fund and the proportion of each type of
investment within it will vary, reflecting
changing market conditions. The Fund
will invest in one or more of the following
asset classes: bonds, cash, near cash and
deposits, equities, property, commodities
and derivatives.
The underlying investments could
perform below their target levels,
or changing investment conditions
could mean the cost of providing the
guarantees exceeds the guarantee
charge we take from your Bond (see
below). If either of these happens, to
protect all members in the With Profits
Fund, we might:
Expenses and charges
As with any investment, there are
expenses involved in setting up and
administering your Bond, and managing
the investments. There are also costs in
providing the guaranteed benefits. We
cover these costs by applying charges to
your Bond. You’ll find details of these in
your Key Features booklet and
Policy Conditions.
As described in the section above, there
are circumstances where we might have
to increase the charge for providing
the guarantees.
Miscellaneous profits/losses
Miscellaneous profits or losses may
arise from the activities of the overall
With Profits Fund – for example, profits
from non-profit business. These profits
or losses are usually shared across the
whole Fund, rather than going to any
particular group of policyholders.
We regularly check for miscellaneous
profits or losses, and consider carefully
how to allocate them to bondholders
and policyholders.
• increase the charge we make for
providing the guarantees, or
• change the investment mix of your
Bond, so that a larger proportion is
held in more secure assets, such as
government bonds or cash.
We would do these only with the
approval of the With Profits Actuary and
the Board.
9
Any allocation of miscellaneous profits
or losses is approved by the With Profits
Actuary and the Board.
If any miscellaneous profits or losses
affect either the Protected Investment
Bond or the Protected Loyalty Bond,
we reflect this in the unit price, or in the
number of units allocated.
Smoothing returns
Investments such as stocks and shares
can rise and fall sharply in value. Large
movements over short periods of time
could potentially mean a significant
change in the value of your Bond, in just
a few days or weeks.
To protect you from some of this shortterm volatility, we average the price
changes during the previous 26 weeks.
This would give you some protection
if you cashed in some, or all, of your
Bond at a time when, for example, stock
market performance has been weak.
Conversely, if stock market performance
has been strong, you won’t receive the
full benefit of this, because of
the averaging.
We do the averaging by giving your
Bond two unit prices. One is the Pure
Price, which reflects the actual value of
the investments underlying your Bond.
When you first make your investment,
we allocate units to your Bond at the
Pure Price.
10
The other unit price is the Average Price,
which is the average of the Pure Price
over the previous 26 weeks. We will use
the Average Price to calculate the value
of your Bond when you cash it in after
its first 26 weeks. If you make partial or
regular withdrawals, the number of units
we cancel is based on the Average Price.
The only exception to the above is when
the Pure Price is less than 90% of the
Average Price. In this situation, to protect
the remaining members of the With
Profits Fund, we base any surrenders or
partial withdrawals on the Pure Price.
If you were to die, and we were notified
of your death within the first 26 weeks of
your Bond being in force, we would use
the Pure Price to value the units. After 26
weeks, we would use the Average Price.
It’s possible for the Average Price to be
lower than the Pure Price – for example,
if the market has risen rapidly over a
short period of time.
Over the long run, the financial impact
of smoothing returns on the overall With
Profits Fund is expected to be neutral. If
any long-term profits arise as a result of
smoothing returns, we give them back to
bondholders as miscellaneous profits.
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Profits Fund. You Family
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OneFamily is a trading name of Family Assurance Friendly Society Limited, (incorporated under the Friendly Societies Act
1992, Reg. No. 939F). Registered in England & Wales at 16-17 West Street, Brighton, BN1 2RL, United Kingdom.
atementFamily Assurance Friendly Society Limited
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HealthAuthority and regulated by the
Financial Conduct Authority (FCA) and the Prudential Regulation Authority. Family Assurance Friendly Society Limited’s
Financial Services Register number is 110067. You can check this on the Financial Services Register at
www.fca.org.uk/firms/systems-reporting/register or by contacting the FCA on 0800 111 6768.
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