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Pru claims rivals not running &#39real&#39 with-profits stakeholder

Prudential has queried how rival life offices are able to run with-profits

under stakeholder, claiming they can only do so by cross-subsidising

capital from traditional with-profits policyholder funds.

The Pru joins Clerical Medical, Scottish Equitable and Skandia, which have

already questioned whether with-profits stakeholder is viable.

Pru says it wanted to offer a with-profits stakeholder contract, with

smoothing outside the stakeholder&#39s ringfenced assets, but it did not get

regulatory approval.

It is working on a unitised with-profits stakeholder but is keen to offer

a true with-profits stakeholder because it says it is a valuable contract

for many people.

Pru says companies offering with-profits stakeholder are not offering

“real” with-profits but access to smoothed equity funds. It says the only

way to run a real with-profits stakeholder is to pour in capital from

shareholders or other policyholders, which it is not prepared to do.

Norwich Union, CIS and Standard Life are also offering with-profits

stakeholder schemes.

Prudential Group actuary Tom Imber says: “I am surprised by what other

companies are doing. It is not something we want to do. If you have a

smoothed with-profits fund on stakeholder, you need to put a fair amount of

capital in.It is a one-way bet – you never get your capital back, which is

not in our interest. At times like this, a with-profits smoothed contract

is very valuable. With-profits comes in to its own when the market is down.”

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