Basically, our investment strategy has two aims; 1. to make sure we have enough money to honour the guarantees built into a lot of our products and 2. to provide a better alternative to our customers than other options  like building society accounts or deposit savings accounts.

Overall, our investment aim is to always beat the average cash ISA return over a five year period.

The investment return on the Police Mutual Life Fund is the single biggest thing that affects both the returns customers get on their savings, and the financial health of the Society.

In the past, Police Mutual tended to use a passive investment approach, and follow the market using fund trackers and similar investments.  While this was right when it was introduced, our strategy hadn't been reviewed in a long time and the investment world had changed significantly.  We also wanted to avoid being too vulnerable to sudden market movements, especially during times of uncertainty like the recession.

Our old investment portfolio worked, but it was very volatile and put us in a risky position if there were big ups and downs in the market.  It basically invested in a number of different index trackers, which work by tracking the performance of some of the world's biggest stock markets, like our FTSE 100.  This was a cheaper approach, but less proactive in managing where money was invested and didn't give us the opportunity to invest assets in other areas of the market or avoid specific investments that are doing very badly.

Now we have appointed specialist fund managers for each type of asset who will actively manage the investments, buying and selling shares as markets change.  This approach does cost more, but when combined with the greater diversification it can often pay for itself as it can offer better returns. And this is something we will be monitoring closely.

Ultimately, the reason for making these changes is to improve the potential returns for Police Mutual members.  Especially at the moment when the average return from a Cash ISA is just 2.1% a year, our new approach should be better than this for the foreseeable future.  In summary, we are more confident of achieving our investment objective, so you should be better off with a Police Mutual plan than putting your savings in an average Cash ISA.

We went through a very robust tendering and selection process which started back in July 2010.  First we had to get agreement from the Police Mutual Managing Board to the proposals, and then spent several months interviewing and selecting the different investment managers for each of the asset types to make sure we made the best choices.  We then had to agree the different contracts and put all the safeguards in place, so we eventually moved the money in June 2011.  The early signs are positive.

Definitely!  Although the current asset mix is right for us now, it's something we should have under constant review, and it is our intention to monitor our investments continually and to revisit the approach at least every three years to make sure that we are still investing in the right areas.

A way of investing where fund managers actively build and manage a portfolio of investments to take advantage of what they believe are the best opportunities.

Anything owned by an individual or company that has economic value. Assets can be financial (eg money, stocks, bonds, shares, invoices, securities), physical (buildings, machinery, cars, land), or qualitative (qualities, skills, brands). Money in a bank or building society account is known as a liquid asset because it can usually be easily accessed.

The proportion of investments in a fund or portfolio held in different asset classes such as equities, fixed interest (or bonds), commodities, property and cash. Asset allocation affects both risk and returns and is an important factor in financial planning and investment management.

The different types of assets available to investors. For example, equities, cash, fixed interest (or bonds) or property.

This refers to the combination of total assets in each asset category.

The tool used by asset managers or investors to measure the performance of a particular portfolio. The benchmark will usually consist of a group of shares, unit trusts or fund managers that are expected to perform in line with the portfolio that they are measured against, as they have similar sorts of investment objective.

Often also known as Fixed Interest, government bonds (or gilts) and corporate bonds are loans that investors can buy that pay interest and have a cash in (or redemption) value. Bonds are for specific periods of time and can be traded on the bond markets. Note that these are different to Life Assurance Bonds.

Money or valuable assets which can be invested to grow in value or generate an income.

Cash is the most basic form of investments and is considered a low-risk asset class. However the returns - or interest received - from cash investments may not beat inflation over the long term. Cash performs better when interest rates increase and not so well when they are low.

Money that is put  deposit account earns interest at a rate relevant to the level of reserves and long term investment conditions. If you lock your money in for longer, it usually pays a higher rate of return because it can be invested to generate a return. The rate of growth on your deposit depends on the interest rate offered, but it won't fall in value.

Offered by most banks, building societies and some insurance companies, a deposit account is a way of saving and investing. You pay money into the account. It usually pays interest net of 20% tax and often has a notice period to avoid loss of interest. There's no risk of losing the money paid in.

The process of spreading an investment across different asset classes, fund managers and markets. The result of diversification is a balanced investment and the aim is to reduce the overall risk of loss in case one area performs poorly.

A market in a developing or newly industrialising country. These markets can deliver high returns due to the rapid pace of development, but are considered to carry greater risk than developed markets.

A contract offering a combination of savings and life insurance. You make regular payments for an agreed period after which you're entitled to a lump sum. This period, called the term, is usually set at anything above 10 years. If you die before the end of the term your endowment pays out a predetermined lump sum. All endowment policies carry charges, which differ among providers.

A commonly used term for shares. Equities may or may not be listed on a stock exchange.

A range of indices which record the performance of certain sectors of the London Stock Exchange markets, the most common being the FTSE100, FTSE250 and FTSE All Share. Each index comprises a specified set of companies, such as the FTSE100, which as the name suggests, includes the top 100 companies in the UK. The value of the index is derived from the values of the underlying shares and provides an up-to-the minute indicator of how share prices are performing in that sector. The FTSE100 is updated every 3 months, so those shares that have fallen in value may drop out of the index and be replaced by new shares that have increased in value.

A portfolio containing investments, that a number of people contribute into and receive benefits from.

Manages the investment of customer contributions in accordance with the investment objectives and guidelines set for that investment fund. Fund Managers are sometimes called Investment Managers.

The company providing an investment fund. These are sometimes referred to as Fund Managers and Investment Managers too.

A government bond/fixed interest security.

The annual percentage return on investment; a more technical term for this is yield.

A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a 'model' portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change in the value from a set start point, whether it's when the markets open that day or so far over a year (year-to-date).

An investment fund that aims to match the returns of a particular market index. The fund may hold all the stocks in the particular index or, more commonly, use a mathematical model to select a sample that will perform as closely as possible to the index. Also referred to as passive management.

This is an asset, financial product or fund of money, which may generate income or grow in value over a period of time.

The result desired by an investor or fund. It may be expressed as a specific performance target relative to the benchmark over a specified time period (for example, to outperform the benchmark by 1% per annum over particular time periods) or as a general statement of intent.

The total return earned on a portfolio of assets over a particular period.

The approach taken to meeting customer's objectives for risk and return. It involves the allocation of assets between different asset classes and strategies.

This is the change in value of an investment or amount of income generated by that investment over a given time period. It isnormally expressed as a percentage.

This is the risk that an investment or savings plan will decrease in value either in actual terms or compared to inflation.

An ISA allows you to save money on a regular basis, or invest a lump sum of money, without having to pay income or Capital Gains Tax on the proceeds.

An amount that you have an obligation to pay.

A place where investments are traded such as the stock market, bond market or money market.

An investment approach that aims to match or track the performance of a financial index. Passive management has lower expenses than active fund management, and the charges to investors are therefore lower.

These are investments such as funds, where a number of people put their money together to enable them to buy a wider range of investments, so that they can have a balanced spread of assets.

Funds are grouped into a sector to be compared to other similar funds. These funds are ranked according to their past performance and divided into quarters. The top quarter is 1^st quartile and reflects the best performing funds, whereas the bottom is the 4^th quartile.

The annual return on an investment, expressed as a percentage of the total amount invested.

The possibility that a particular outcome may not occur. In investment terms, risk is used to define all of the uncertainty relating to an asset and what it might return, including positive as well as negative possibilities.

The regular putting aside of money out of income, usually to build up capital for the future.

A term used to describe all types of stocks, shares, bonds and other investments that are traded on a market, except for commodities (such as gold or tin) and money.

A place for dealing in stocks and shares (equities) such as the London Stock Exchange.

Funds that are not actively managed by a fund manager but are set up to match the performance of a particular stock market by investing in all - or a representative selection - of the companies listed in that index.

Essentially a fund made up of shares, property, cash and fixed interest securities, which usually carries a medium risk.  With-profits funds pool policyholders' investments, and customers share in the company's investment returns and other profits. These returns are smoothed to help reduce the volatility associated with direct equity investments.

This relates to the level of change in value of an investment. If an investment is volatile, the value of it frequently goes up and down, and it is often seen as risky.

The percentage return paid on a stock in the form of a dividend or the effective rate of interest paid on a bond.