Prudential has established the flexible investment plan, a unit-linked
portfolio bond that provides access to a range of investments through
five existing Prudential bonds.
The product consists of the cautious bond, corporate bond, property
bond, prudence bond and managed bond. The cautious bond invests
in the cautious portfolio, which is made up of three M&G fixed-interest
funds and the Prudential property fund.
The corporate bond invests in the M&G corporate bond fund, while
the property bond invests entirely in the Prudential property fund. The
prudence bond invests in up to two with-profits funds and the
managed bond allows investors to choose from 41 internal and
external funds plus four risk-graded portfolios. Investors can choose
only one of these five bonds at the outset but can make up to 12 free
switches a year.
The product aims to produce growth, although regular income can be
taken in the form of partial withdrawals. The plan has a choice of an
initial charge or no initial charge structure. The initial charge option
has lower early surrender charges than the no initial charge option.
Early redemption penalties of between 9 per cent and 1 per cent will
apply across the charging structures in the first five years unless the
policyholder opts for a three-year term. However, this will reduce the
initial allocation rate.
Other interesting features are programmable switching which allows
investors to set up switches at the outset and automatic rebalancing,
where investments are moved back into the original investment split
at the end of each year. Interest sweep is a feature available on the
cash fund, which allows the interest from the fund to be transferred
into up to three unit-linked funds.
This product offers more features than average unit-linked bonds and
provides clients with the flexibility to switch in an out of each elements
but some investors may be paying for features they will not need,
while the early surrender penalties may be a deterrent to invest.