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Wood warns Government on Sandler plan

Prudential UK chief executive Mark Wood has told the Government its proposed with-profits product will not sell if it adopts Sandler&#39s 100/0 proposal because life offices have insufficient capital to make it work.

Speaking at Money Marketing Live in Manchester this week, Wood said that a 90/10 model was better for consumers because, unlike the 100/0 model, it has enough capital to withstand the tests of volatile markets.

Woods&#39 comments come ahead of a major national marketing campaign by Prudential targeting its Prubond at consumers and IFAs, with a launch believed to be set for next month.

He accepted that the new product would have to find a way to rethink the concept of the market value adjuster, which he described as a “bad surprise” for consumers wanting to exit early.

He did not see a surge in equities – expecting the FTSE 100 to stay in the 4,000 to 4,200 bracket for the short term at least – and said consumers needed to understand payments into Prudential&#39s with-profits fund would not go to subsidising existing policyholders.

Wood forecast an improvement in media sentiment towards with-profits over the next six months as the performance of with-profits pensions is compared with unit-linked pensions.

He said: “The Government believes in Sandler&#39s 100/0 approach but our view is there is not enough capital in the market to give the smoothing that the consumer wants. Where markets move violently or where lots of people withdraw at the same time, it is difficult to achieve smoothing on a 100/0 fund.”

IFG Financial Services consultant Tom Ryan says: “I cannot see with-profits working in the Sandler suite if they go for 100/0.”

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