With-profits investments have acquired something of a pariah status in recent years. Anaemic performance, the imposition of seemingly arbitrary and punishing exit penalties and a welter of bad publicity has decimated the reputation of what was once the favoured investment vehicle of millions of Britons.
Nevertheless, there are still plenty of active with-profits policies out there, and this week many people will find out how much of a bonus - equivalent to interest - their investment has earned in the past year.
But after a difficult year on global stockmarkets and with record low returns on money invested in government debt, experts are not holding their breath for anything special.
"What we are likely to see from the with-profits providers over the next few weeks is that firms which have a track record of paying small bonuses will continue to do so, while those which have been more generous in the past will - because of market conditions - cut their payouts," says Patrick Connolly, a director at financial advice firm AWD Chase de Vere.
Problems in the with-profits sector date back far further than the recession or even the start of the global financial crisis. In fact, according to Mr Connolly, if you want to understand how with- profits lost their lustre you need to go back to the late 1990s and early 2000s.
"Providers competed to pay ever-higher bonuses to attract new business into their funds, and by doing so they weakened their financial position, invested heavily in shares and moved away from the safe and steady ideas that lie behind the with-profits concept," Mr Connolly says. And the key concept behind with-profits is one of supposed "smoothing", basically excess profits made in good times held in reserve to pay bonuses during the bad times.
But in the late 1990s and early 2000s, funds paid too much out and held too little in reserve for the inevitable bad times. As a result, bonuses were slashed and draconian exit penalties introduced to simply stop some funds from going to the wall, it seemed.
"The sector has never recovered from this, and even when we have good years for investment the bonuses are still in the main very poor.
"Only a few funds, such as Prudential, L&G and maybe Aviva, have the strength to buck this trend a little," Mr Connolly adds.
But there are plenty of so-called "zombie" funds out there which are in virtual stasis, accepting no new money, managed by third- party firms, paying minimal bonuses and still subject to exit penalties. …