The Lemon Fool

My aunt said she was invested in unit trusts. But on looking at her investments a large proportion were insurance funds. She seemed to have started with all unit trusts, then her advisor slipped in insurance funds masquerading as unit trusts. One insurance fund even had the same name as a unit trust. Seemed like a scam, as insurance funds are inferior investments.

swynn wrote: Seemed like a scam, as insurance funds are inferior investments.

Mirror funds are common as are policies that link returns directly to the OEIC or Unit Trust performance. In both cases the underlying investments are the same as the direct route, but tax and charges may be different.

swynn wrote:One insurance fund even had the same name as a unit trust.

It almost certainly is the same-named unit trust, just within an insurance wrapper. While I generally agree with your sentiments you need to look at the structure. Some (not all) such insurance investments are actually a tax wrapper that allows activity within the wrapper (buys & sells, dividends, etc) tax free. Those also allow withdrawal of up to 5%pa of the initial investment tax free, with once all of the initial investment is withdrawn the rest being liable to income tax. As such they're intended as an investment-for-retirement tax deferral mechanism, sort of like a SIPP (but without the tax break going in).

Having said that, they are definitely not for everyone's situation, and usually suffer quite high charges....

Wanting to be wised-up about insurance funds, I did a word search on "insurance fund" and "insurance funds" in the Asset Management Market Study:

https://www.fca.org.uk/publication/mark ... report.pdf

and came up with 0 (zero). Oh dear! This "study" is 206 pages long!

swynn wrote:Wanting to be wised-up about insurance funds, I did a word search on "insurance fund" and "insurance funds" in the Asset Management Market Study:

https://www.fca.org.uk/publication/mark ... report.pdf

and came up with 0 (zero). Oh dear! This "study" is 206 pages long!

They are covered under "Packaged Retail and Insurance-based Investment Products" . Frequently encountered as "insurance bonds" . I have never seen the term "insurance funds"