The company has created a new version of one of its fund links, the PruFund protected growth fund. It has also introduced a range of guarantees on its PruFund protected cautious fund link. Both unit-linked funds invest in Prudential’s with-profits fund and are available in sterling, dollar and euro denominated versions.
All three versions of the PruFund protected cautious fund now have guarantee options covering six, seven, eight, nine and 10 years. These options provide investors with a guaranteed minimum amount of their initial investment, less any withdrawals, at their chosen date.
This change was made because advisers said they wanted greater flexibility to save for a specific event or purpose.Investors pay between 0.15 and 0.9 per cent a year for the guarantee, depending on the term. A five-year guarantee option is not provided at the moment because the shorter the term, the greater the cos, so the current cost of a five-year option would not provide value for clients.
All three versions of the PruFund protected growth fund now provide a 10-year spot guarantee at the cost of 0.35 per cent a year. Prudential points out that these funds have a higher exposure to equities than the PruFund protected cautious funds, so a guarantee offers peace of mind. However, it is offering only a 10-yearguarantee rather than a choice of various terms because the guarantee costs are prohibitively higher due to the greater equity content relative to the Prufund protected cautious fund.
Other changes include a revision of allocation rates and the annual growth reward applying from the end of year one, so investors benefit sooner from the 0.1 per cent bonus than previously.
Some IFAs will welcome more choice relative to the usual five and 10 year guarantees offered on with-profits funds. The lack of a five-year option on the PruFund protected cautious fund may disappoint some IFAs but the cost of the guarantees inevitably provides limitations for providers.