Information for people whose insurance companies have closed their with-profits funds and have stopped selling policies to new customers.

In some cases the financial strength of the fund can be the deciding factor, but there are a range of other reasons why with-profits funds close to new business. For example, some close because they cannot attract enough new customers or do not make a large enough profit on any new policies sold; others might close because they are being taken over by another company.

When an insurer closes its fund it must write to all its policyholders explaining:

If you are not sure whether you fund is open or closed you can ask your insurance company.

In some cases closed funds switch from investing in riskier assets such as shares, which tend to produce good returns in the long-term, to investing in fixed interest assets such as gilts and bonds, which tend to have lower but more predictable returns. Investing in less risky assets protects you from short-term falls in the financial markets and helps your insurer to be able to meet any guarantees it has made to policyholders. But it also means that in the long term the value of your policy may not be as high as you expected.

However, not all closed funds perform worse than open funds and some closed funds even perform better. If you are unsure you should speak to a financial adviser about how the performance of your fund compares with that of other open and closed funds.

Whether ending your policy is the right decision depends on your personal circumstances and the sort of policy you have. Having a policy in a closed fund may affect your decision, but there are other things you should also consider, such as whether your policy has any valuable guarantees.

To learn more about the things you should consider see What to do with your policy.

There are two ways your policy may be transferred to another insurer:

If your insurer sells the fund your policy is invested in to another insurer this is called a 'Part VII' transfer. This is a legal and regulatory process and it is designed to ensure that policyholders are no worse off following a transfer. If your insurance company plans to sell your policy to another insurer it will place adverts in the national press and it may write to you to let you know.

Before your insurer is bought by another company the Financial Services Authority (FSA), the UK’s financial services regulator, will review the terms of purchase and the intentions of the new owners. If the purchase goes ahead, the terms of your policy will not change and the FSA’s standards on running with-profits funds will continue to apply to the new owners.

As the regulator, the FSA is responsible for regulating the way insurers run their with-profits funds, and its standards apply whether the funds are open or closed. It has rules for when an insurer closes its fund to ensure that policyholders are treated fairly. For example, funds that close to new business must notify their policyholders and provide information about their options. They must also notify the FSA promptly and provide it with a plan for running down the fund.

Look in your policy documents or your insurer's guide to with-profits. Your insurer should also be able to answer factual questions about your policy, but it may not be able to advise you what to do.

If you are unsure what to do you should speak to a financial adviser – see Getting help with money decisions.