Prudential has become the latest provider to cut with-profits bonus rates across its product range as persistently low interest rates and volatile markets hit payouts.
However, the maturity value of Prudential’s with-profits products increased by between 2.5 per cent and 6.3 per cent compared with 2011 (see table below).
The annual bonus rate on Prudential’s prudence bond has been reduced from 3 per cent in 2011 to 2.5 per cent this year. Annual bonus rates on personal pensions have been cut from 3 per cent to 2.5 per cent while bonus rates on corporate pensions have fallen from 3.25 per cent to 2.75 per cent.
A Prudential spokesman says the reduction in annual bonuses was “inevitable” as economic uncertainty impacts on investment returns.
Prudential chief actuary David Belsham says: “While the investment performance of Prudential’s with-profits fund was not immune to the extreme market conditions and economic uncertainty experienced in 2011, customers have benefited from the effect of ‘smoothing’ which has reduced the full impact on claim values.
“Today’s announcement reflects the way in which we manage the fund to ensure a fair approach to the setting of bonus rates.”
The provider added £1bn to policy values through annual bonus increases and £1.1bn through final bonus payouts in 2011.
AWD Chase de Vere head of communications Patrick Connolly says: “This bonus declaration is a clear endorsement that Prudential remains, by some distance, the leading provider of with-profits investments
“With-profits returns continue on a downward spiral as we see product providers, including Prudential, making cuts to annual bonus rates and payouts, almost regardless of how their underlying investment funds perform.”