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Prudent approach

Prudential International, the newly formed offshore branch of Prudential, has established a with-profits and unit-linked bond called the international prudence bond.

The bond is marketed mainly as a withprofits bond but, in addition to two with-profit funds, it offers a range of 11 unit-linked funds from five external fund managers.

One of the with-profits funds is sterling denominated and the other euro denominated. Both invest in the Prudential with-profits fund. The sterling denominated fund has an annual bonus of 4.5 per cent, while the annual bonus for the euro denominated fund is 4 per cent. A loyalty bonus of 0.2 per cent a year is awarded to investors from year six if no withdrawals are made during the year. Withdrawals can be taken monthly, quarterly, half-yearly and yearly.

Investors with different investment objectives also have access to 11 unit-linked funds, which include two balanced managed funds and nine external funds from Newton, Merrill Lynch and Schroders. The first 20 fund switches each year are free. The bond&#39s strong points are the flexibility to switch between funds and the tax efficiency that comes with offshore investment.

Cautious investors who are wary of stockmarket volatility may go for the with-profits option, while those who are willing to take on more risk can opt for the unit-linked funds. If risk profiles change, there should be another fund that investors find more suitable.

However, as with all with-profit bonds the level of future bonus rates may fluctuate and some investors may feel that the 11 unit-linked funds do not provide enough diversity.

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