High interest rates played a part in the with-profits sector declining in 2022, a report has found.
AKG, the ratings and review provider, found a “significant fall” in the sector’s technical provisions in 2022.
Its UK Life Office With Profits Reports analysed the 195 sub-funds within 64 funds from 21 firms that were active in the UK market at the start of January 2024.
It found the with-profits market dropped around 15 per cent to £210bn, from 2021 levels of £248bn.
The fall was down to not only a gradual decline in the sector but the increase in interest rates meaning lower liability values as valuation interest rates increase.
Lead author of the reports and AKG chairman, Gary Bown, said: “Despite the acknowledged evolution of the market in recent years, there’s still a huge amount of client money wrapped up in with profits funds and hence a significant universe of funds for analysis, either open or closed.”
Operation of the pooled long-term investments have been impacted by new regulation, including consumer duty and solvency reform, said Brown.
He added: “It’s vital that when client circumstances dictate, advisers, paraplanners and trustees put themselves in a position to adequately assess the market and make informed decisions via support from this type of output.”
The annual series of reports have been published for more than 25 years and are designed to help advisers, paraplanners, trustees and other analysts to assess the with-profits market.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com.
