Daring to say the B word

It’s bonus season again, and bonuses are a contentious subject around the turn of the year.

There is a widespread view that in some areas of the financial world – notably investment banks – they are too high. However, in another financial area – with-profits policies – many people believe that bonuses are too small.

The Financial Services Authority (the FSA) has taken an increasing interest in the operation of with-profits funds. Last year the FSA published a consultation paper, ‘Protecting with-profits policyholders’, after undertaking a ‘With-profits regime review’. The paper noted that there had been “deep cuts in annual bonuses, often to zero, and reductions in final pay-outs”.

The difficult investment conditions in 2011 mean that this year’s bonuses are unlikely to be much different from last year’s. However, that does not necessarily mean that any with-profits policies you hold should be abandoned. Any such decision requires a careful individual policy review and an analysis of the alternatives available. This is not an easy task, because public information on with-profits funds can be hard to interpret.

Why not ask us to undertake a review and analysis of your policies for you? You can then decide if you want to wait for next year’s bonus.