By Jennifer Hill

LONDON (Reuters) - Returns on with-profits bonds are on the up, a study shows. The average surrender value of a 25,000 pound bond over two, three, four and five years are all higher than they were a year ago, according to the latest survey by Investment, Life & Pensions Moneyfacts.

It shows that although many with-profits bondholders have jumped ship in recent years, those who maintained their investments are realising the benefits.

Someone who invested 25,000 pounds in an average with-profits bond in February 2002 and surrendered the policy three years later would have received just 25,655 pounds.

But, by keeping the bond for a further two years, it would now be worth 30,999 pounds -- an increase of 20 percent.

Payouts over three and four years show average growth of 21.3 percent and 35.5 percent respectively, while five-year returns are slightly worse at 23.9 percent, reflecting the more difficult investment environment during this period.

During the mid-1990s, with-profits policies -- which aim to "smooth" returns by holding back some returns in years of strong investment performance to pay out in the bad -- were the main avenue for investors looking for a long-term, secure investment.

Billions of pounds flooded into the sector, which was seen as relatively low-risk, had guaranteed annual bonuses and the potential for final bonuses.

However, fund performance tumbled as the bear market of 2000/03 took its toll and forced fund managers to cut bonuses.