Bid/offer spread - the offer price is the price at which an investor buys units in a unit-linked fund, the bid price is the price he gets when he sells. The difference between the two is known as the spread and can be as high as 5 per cent.

Entry/exit charges - products that carry such a charge tend to charge either an entry fee, levied when the investor buys into the fund, or an exit charge, which is applied when they sell. Funds tend to have entry/exit charges or a bid/offer spread.

Policy fee - applied on a monthly basis to cover costs, it tends to range between £1 and £3 per month. Administration fee - levied to cover costs if the investor wants to switch from one fund to another or to change their premium level.

Management charge - taken out of the fund on an annual basis, this covers costs such as the commission involved in buying and selling shares, and the cost of employing a fund manager. It generally varies from 1 to 2 per cent.