Mis-sold With-profit Bond

If your professional investment manager or financial adviser has neglected to inform you of the possible risks of investing in with-profit bonds, warn you of financial penalties for withdrawing funds early, or let you know how your money is being invested, you might have been mis-sold a with-profit bond and could be eligible for compensation.

What are with-profit bonds?

With-profit bonds are a type of bond which typically guarantee the investor (you) a certain minimum return, called a “guaranteed benefit”, based on the initial sum that you invest. They are typically considered a lower-risk investment compared to Investment Bonds and are best invested in long-term (5 – 10 years).

Providers of with-profit bonds pool your investment along with other peoples’ investments to form a with-profits fund. The fund is made up of a combination of assets, meaning that your investment can be put towards a mixture of bonds, shares, property, and money market investments.

Your investment portfolio is reviewed annually. If the providers notice an investment has been doing well, they may declare bonuses, which are then added to your investment, incurring you a profit.

The pros of investing in with-profit bonds

Unlike stocks, the value of bonds in general doesn’t fluctuate, which makes them more reliable. In the case of with-profit bonds, you might also expect bonuses to be added onto your initial investment, though this may not always happen. Bonuses can be annual or terminal/final (awarded to you when your policy comes to an end). 

Additionally, when you invest in a bond, you know exactly how much interest you will be getting from it each year (a.k.a. the bond’s coupon rate) and for how long (i.e. the bond’s maturity).

However, if you’re investing in bonds within with-profit funds, this changes things slightly.

The possible cons of with-profit bonds

The main risk of investing in bonds within a with-profit fund is that the bonuses you might be counting on are not guaranteed, especially if the financial markets are not doing so well. Also, bonus rates can go up or down, meaning that you might end up getting back less than what you initially invested.

There are also different charges that are applicable to with-profit bonds that you might not be aware of. These include:

When it comes to bonds in general, there is also something called Default Risk. Typically, the higher the Coupon Rate (interest) of a bond, the higher the Default Risk of investing in that bond. The Default Risk implies the risk of the government/company defaulting on i.e. failing to pay back the initial investment. The most common cause is the issuer’s financial instability.

Was I mis-sold a with-profit bond?

If a with-profit fund or bond was misrepresented to you or was not suitable for your needs, knowledge in investing or not adapted to your financial plans for your future or current financial abilities, then you might have been mis-sold a with-profit bond.

With-profit bonds fall under the category of some of the most commonly mis-sold investments, along with Stocks and Shares ISAs, Personal Equity Plans, Managed Portfolios, Self-Invested Personal Pensions, and others.

All of these carry their own risks. If you were not fully informed of those risks, then you might have been mis-sold an investment.

With Return My Money, claiming compensation for a mis-sold with-profit bond, or any other mis-sold investment, is made simple and easy. By filling out our contact form and explaining your situation, we can help you determine if you’re eligible to make a claim and will do all the work for you – on a no win, no fee basis. And we will keep you informed every step of the way!


What are bonds?

Bonds have long been seen as a staple of investment. By issuing bonds, the government or a company (called the issuer) receives “loans” from multiple investors in the form of buying bonds. Simply put, you, as a possible investor, will put some money towards a project. In return, the government/company issues you a bond, promising to give you back the money you’ve loaned for the duration of the bond, annually – with interest (a.k.a. the “Coupon Rate”). This is why bonds are an investment; you usually get back more than you put in.

Are with-profits bonds taxable?

Your income tax (at least at the basic rate) is reduced from with-profits bonds at source. If you’re a basic rate taxpayer, you won’t have to pay any further income tax. However, if you’re a higher-rate taxpayer who withdraws more than 5 % p/year, you would have to pay an additional 18 % tax. The returns you get from with-profit bonds are not liable for capital gains tax, 

How can I get compensation for a mis-sold with-profit bond?

Just fill out the Return My Money claim form to help us assess your bond and overall situation. We will review what you sent us and let you know if you’re eligible for compensation. If you are, we handle everything on your behalf and keep you updated regularly.

Is a terminal bonus guaranteed?

The bonuses you might be counting on when investing in with-profits funds (and bonds) are not guaranteed, especially if the financial markets are not doing so well. This applies equally to terminal/final bonuses and annual bonuses.