Glossary · UK
What is Unit-Linked Fund?
An investment fund, common in pensions and life policies, where your money buys units whose value rises and falls with the underlying assets.
Full Definition
A unit-linked fund is a pooled investment used mainly within life assurance policies, pensions, and investment bonds. Your contributions buy units in the fund, and each unit's price reflects the value of the underlying assets, such as shares, bonds, or property, divided by the number of units in issue. As markets move, the unit price changes, so the value of your holding rises and falls accordingly; there is no guaranteed return and your capital is at risk. Providers usually take an annual management charge expressed as a percentage of the fund value, which reduces growth over time. Unit-linked funds differ from with-profits funds, which smooth returns, and are the typical default for modern defined-contribution pensions. They matter because most workplace and personal pension savings are invested this way, so understanding the link between unit prices, charges, and your eventual pot is central to retirement planning. Compound growth over decades can be significant.