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Prudential WP bonuses cut by up to 20%

Prudential is reducing payouts on with-profits by up to 20 per cent and leaving some shorter-term polices without a terminal bonus.

The company says the move is a result of the current state of the stockmarket, which it does not expect to pick up over the coming year.

The cuts mean that an investment of £10,000 in a Pru with-profits bond five years ago will now be worth £12,280, down from £13,849 last year.

A 25-year £50 a month endowment would now pay out £62,647 compared with £78,302 last year.

Annual bonuses are cut to 3.5 per cent from 4.5 per cent for pensions and 3.25 per cent from 4 per cent for bonds.

Appointed actuary David Belsham says the stockmarket looks fair value at current levels. The withprofits fund lost 8.1 per cent over the year. He says the company&#39s orphan assets are currently worth around £5bn and the fund has 45 per cent in equities compared with 53 per cent the previous year.

The company&#39s stated freeasset ratio is 8 per cent, which it says would go up to 8.4 per cent if the inclusion of the amalgamated Scottish Amicable funds were not included.

Belsham says: “Policies held for less than 10 years may not attract any terminal bonus as to pay that on top of the annual bonus, given the returns achieved in those years, would be unfair. We have applied for no waivers at all – our free-asset ratio reflects real capital and plain vanilla investments.”

Dennehy Weller managing director Brian Dennehy says: “I do not have any problems with this. Over five years, with-profits works. It still illustrates that you can have a reasonable and smoothed return.”

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