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's ringfenced assets, but it did not get
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
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.”