With-profits funds outperform in 2025 as UK equities drive strong returns

• With-profits funds delivered an average return of 9.6% in 2025, up from 5.6% in 2024 – beating high street fixed saving rates
• UK equities led returns at 21.8%, boosting with-profits performance
• Howden’s analysis covers approximately £171bn of assets, spread over 93 with-profits funds from 19 insurers.

All with-profits funds generated a positive total asset return in 2025, at a median rate of 9.6%, according to this year’s ‘UK With-Profits funds’ report from Howden. This exceeded high street savings rates for the year, and maintains with-profits funds’ outperformance of savings rates over 10 years.

The analysis covers £171bn of assets across 93 funds from 19 insurers, helping UK life insurers determine whether their with-profits asset allocation remains appropriate for them. The 2025 analysis found that all 93 of those funds generated positive investment returns across a 12 month period.  The spread in returns over one year was 17.3%, with the highest return being 18.9% and the lowest return being 2.8%, with larger funds generally outperforming smaller funds.

In 2025, with-profits funds benefitted from a high level of exposure to UK equities, which were the strongest performing asset class – generating a median return of 21.8%. The mean allocation to UK equities was 36%, compared to a 3.4% market cap in the FTSE All-World index as at 31 December 2025.

Chart: Asset class returns compared with reference indices over 2025

Driven by optimism around AI, among other factors, global equities also performed well over 2025, returning 20.5% over the year. Global equity allocations have historically been a key driver of long-term outperformance and this remains an important differentiator of returns over longer time periods.

On average, with-profits funds outperformed Howden’s benchmarks for government bonds, overseas equities, and cash asset classes. They were close to the benchmark for corporate bonds and underperformed the benchmarks for UK equity and property asset classes.

Amit Lad, Principal at Howden Insurance Actuarial & Longevity, Senior Consulting Actuary: “With all 93 funds delivering positive returns, 2025 was a strong year for with-profits. Beating high street fixed savings rates has become a familiar result, and reflects both favourable markets and the expertise of investment managers.

“A bias towards UK equities paid off last year, but we believe the gradual increase in global equity exposure remains important for longer-term performance. Insurers should recognise here the benefits of diversification alongside the rewards of a strong domestic market.”

“As reporting and governance demands continue to grow, improvements in the quality of investment data have been welcome. However, strong returns should never discourage scrutiny of costs. With manager fees varying considerably, regular conversations about performance and value for money remain essential.”