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Prudential cuts annual with-profits bonus rates

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.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Disappointing to see annual bonus rates reduced.I telephoned Prudential only today and asked if they had any plans to reduce their charges for their 4.5 million customers,reply not that they were aware of,again disappointing as they have reduced charges in some of their other funds.I asked about the charging structure and they said a charge of under 1% was taken if fund grew under 7% and a charge of slightly over 1% was taken if fund grew by over 9%.Naturally I commented these charges were all rather vague.

  2. Disappointing for customers obviously when they are getting 6.3% more than a year ago. I would like that type of disappointment !

    Amazing how that can generate bad headlines !

    I have spent my career defending the principle of with profits but the tide is clearly going out the other way. There was a time, not so long ago, when everyone pooled their resources in a general principle of mutuality. We live in a harder less caring age and it is now everyone for his self, and the world is a much poorer place for it. Pru’s fund is a last bastion of this principle and through every weather it has worked and outshone its sexier alternatives year in year out but it doesn’t fit the brave new world of the New Model Adviser and so will still prosper but as a niche fund.

  3. I can’t see Ned Naylor’s defence of all things WP?

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