Allocation rate reflects the fact that not every penny you invest in a pension life insurance or investment contract actually gets invested. Thats because financial companies remove some of your money as other charges. What remains is the allocation rate.

For instance a 65 allocation rate on a £1000 contribution means that £650 of your money will actually be applied to your contract. So the lower the allocation rate the poorer the contract is in terms of value for money and vice versa.

Some financial institutions offer very high allocation rates of up to 107 in the first few months as a loss leader. This may encourage you to invest but you should check the ongoing allocation rate to see whether you are getting a good deal over the term of the contract.

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