Using the smoothed With Profits fund to clear a mortgage, to reduce the impact of pound cost ravaging

Wesleyan run a version of their flagship With Profits Fund specifically for the adviser market – the With Profits Growth Fund Series A. This version is specifically designed to sit on independent platforms, thereby making it accessible to advisers at any time and meaning the fund can easily be incorporated into a diversified portfolio.

The fund aims to provide capital growth over the medium to long term by investing in UK and international equities, bonds, commercial property, cash and other related investments, while avoiding sharp rises and falls in performance by ‘smoothing’ returns.

Read on to hear how an adviser has worked with their client to use the Wesleyan With Profits Growth Fund to benefit their total investment portfolio.

 
 

Mark’s story

Mark, 58, has actively been saving into his SIPP for years, and has accumulated a pot of more than £700,000. Alongside this, he has also invested in several buy-to-let properties, to supplement his long-term income requirements in retirement and diversify his investment base. He is intending to retire by the age of 60.

Mark still has £150,000 mortgage/s on his lettable properties. Fortunately, he had transferred these to a 5-year fixed rate deal, however that term is now coming to an end, and they will be reverting to variable rate mortgages over the next couple of months. Unfortunately, the end of the fixed-rate term is due to happen at a time when interest rates have been increasing as a means of controlling inflation.

Mark is concerned over the uncertainty of future interest rates, and the fixed rate mortgages currently available are unattractive to him. As an alternative, Mark is considering releasing funds from his SIPP, by accessing the Pension Commencement Lump Sum (PCLS) to clear his mortgage debt and minimise his monthly outgoings.

 
 

To manage the volatility in his portfolio in the run up to Mark’s retirement, his adviser had advised him to switch a reasonable proportion of his pension pot into the Wesleyan smoothed With Profits fund, to reduce volatility compared to the more speculative funds Mark holds.

With Mark now requiring some funds – considering his looming fixed rate mortgage end – he has the option to withdraw from the smoothed fund, meaning he is less likely to realise the falls experienced by his other funds, and will be able to sell fewer units than he otherwise might have to.

How does this work?

Over recent months, as economic uncertainty has severely dented investor confidence, we have witnessed key investment markets/funds gradually falling.

 
 

For the Wesleyan With Profits Growth Fund however, the downside of the economic uncertainty has been managed through the implementation of a smoothing process, whereby gains are held back during periods of market growth and are reinvested into the fund as markets contract, which has helped to ensure this smoothed With Profits Fund has outperformed it’s unsmoothed counterparts*.

Benefits for Mark

This is significant for Mark, as when he needs to access his PCLS, instead of having to sell a higher number of units from a fallen OEIC fund for example, he can realise the same cash value by selling a lower number of units from his smoothed With Profits Fund.

This means overall he will retain a higher number of shares across the diverse range of funds in his pension portfolio, providing him greater potential to maximise returns when markets recover.

 
 

And with the fund being daily traded, daily priced and daily smoothed, at the time Mark decides to make a withdrawal from his smoothed With Profits Fund, he will know the exact value of the fund, plus the funds will be available to him imminently.

Wesleyan has been helping people reach their financial goals for 182 years, and a large part of that longevity is down to the fact that they are a capitally strong mutual. Without shareholders, they have the scope to invest with a long-term approach, removing the pressure to pursue short-term gains.

It also gives them the opportunity to control the amount of reserves they hold, directly impacting their financial strength.

 
 

A history of delivering consistent long-term investment returns means they are well placed to support the needs of financial advisers and their clients, especially in today’s challenging market conditions.

For more information about the Wesleyan With Profits Growth Fund, please click here, email intermediaries@wesleyan.co.uk or connect on LinkedIn.

*Wesleyan With Profits Growth Fund 10-year performance returns to 30 Jun 2023 at 77.84% v ABI Mixed Investment 40-85% Shares at 64.91%.

 
 
Please note that past performance is not a reliable guide to future performance and the value of your investment, and any income can go down as well as up, so you could get back less than you invested.
WESLEYAN’ is a trading name of the Wesleyan Group of companies.
Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.

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