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How we manage the Life Fund

Since 2011, the Fund has been managed by some of the most experienced fund managers in the business.

Over 150,000 members of the Police Service and their families invest in the Police Mutual Life Fund

Aims to give policyholders a return that is higher than that of an average Cash ISA over a five year period.

However, all investments have a degree of risk, and there is a possibility that the value of investments in the Life Fund can go down as well as up.  To reduce this risk, we have created a variety of guarantees on our products.

About Police Mutual Life Fund

As we don't have any shareholders to satisfy, we can put your interests first by taking a sensible approach when it comes to your money

Over 90 years of investment experience

We invest your money in the Police Mutual Life Fund. It's our £800m investment fund in which our members have been saving and investing for over 90 years.

A strategy for growth

As part of our on-going commitment to getting the best returns for our members, we recently reviewed and changed our Life Fund investment strategy. We implemented the new strategy in 2011 with the focus on generating the best returns possible within the market conditions.

Active management

The strategy allows our specialist Fund Managers to take advantage of the markets that perform strongly. For example, if overseas markets are performing well, we can move more quickly into those areas that are showing positive signs of growth. Currently a fifth of our portfolio is invested in the US markets as they continue to show signs of sustained growth.

Always on the lookout

Our Fund Managers buy and sell shares as the markets change and are continually reviewing how our assets are performing.

Spreading the risk

   

Our Life Fund is also more resilient to the ups and downs of the global financial market.

We've taken steps to reduce the risks we're exposed to by moving into more stable, safer investment areas.

Principles and Practices of Financial Management

The Financial Conduct Authority requires us to produce a document outlining our Principles and Practices of Financial Management, or PPFM. This document explains in more detail how we manage policies invested in our Life Fund, which includes our Regular Savings Plan.

1. The Principles - how we run our business longer term.

The overarching standards that we adopt in managing the Life Fund (where all our with-profits plans are invested).

The business model we use to ensure that we meet our duties to our with-profits policyholders.

How we respond to changes in the business and economic environment.

2. The Practices - covering the shorter-term.

How we manage the Life Fund.

How we respond to changes in the business and economic environment in the shorter-term.

The practices allow a knowledgeable observer to understand the key risks and rewards of taking out - or keeping an existing-with-profits plan with Police Mutual.

You can download and keep the latest copy of our PPFM document below:

Principles and Practices of Financial Management 

We monitor compliance with the PPFM on an annual basis and report on this at the end of June every year. Our latest report is available for download below:

Report for Policyholders on compliance with the Principles and Practices of Financial Management

To summarise the key points of the PPFM we produce a Customer Friendly Principles and Practices of Financial Management (CFPPFMs). You can download it here: 

Guide to Investing in the Life Fund

Other things you should know

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.

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.

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.

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.

Basically, our Investment Strategy has two aims:

  1. 1. To make sure we have enough money to honour the guarantees built into a lot of our products
  2. 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.

 

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