With-Profits Bonus Declaration
A year of strong performance
I'm very pleased to report that 2013 was another good year for the Prudential With-Profits Fund and we've once again been able to deliver strong investment returns.
In fact, our With-Profits Fund has delivered positive returns every year since the worst of the banking crisis in 2008.
Delivering for you
Although economic conditions have continued to improve from the low points of the financial crisis, we've all seen that markets can be uncertain. You can be assured, however, that our focus is on looking after your money carefully. Our prudent approach has been key to the success of our With-Profits Fund and continues to be a priority.
The approach taken by the team of investment experts running the Prudential With-Profits Fund has meant we have delivered a total return on the Fund of 55.1% (net of tax) and 66.5% (gross of tax) over the last 5 years and 101.3% (net of tax) and 119.4% (gross of tax) over the last 10 years, both up to 31 December 2013. Over the course of 2013 alone, we achieved a return on the Fund of 8.7% (net of tax) and 10.3% (gross of tax). All of these figures quoted are before plan charges and the effects of smoothing. Please note that past performance is not a reliable indicator of future performance.
What this means for you
This year, we're pleased to say that total bonus rates are being maintained or increased for most of our with-profits customers. We continue to pay fair bonuses based on what the Fund has achieved and we're delighted to be able to continue paying competitive bonus levels.
Generally, the better our Fund performs over the medium to long-term, the bigger scope we have to pay bonuses. We aim to pay bonuses that reflect your fair share of the investment return on our With-Profits Fund, over the lifetime of your policy. The return on your policy will be different to the 8.7% (net of tax) and 10.3% (gross of tax) return on the Fund quoted above, mainly due to the effects of tax (where applicable), smoothing and the application of plan charges. The rate of bonus added will also vary depending on the type of policy you have. You'll find the details of how your policy has performed in your yearly statement.
In some circumstances, we may apply a Market Value Reduction which will have the effect of reducing your fund value if you take money from your policy. We do this to ensure that no-one gets more than the fair value of their plan and it is there to protect customers who stay invested in the Fund.
The smoothing process
Our With-Profits Fund aims to smooth some of the extreme ups and downs of short-term investment performance in order to deliver steady performance over the medium to long-term. We do this by holding back some of the investment returns in good years so we have the scope to support bonus rates in years where investment returns are lower.
The smoothing process is a key feature of With-Profits. For instance, some of the investment returns held back in good years softened the impact of the significant market downturn back in 2008, when returns were very poor because of the financial crisis. This is exactly what our With-Profits Fund is designed to do in order to provide a more stable return to our policyholders from year-to-year.
You're right to be with the Pru
Ours is one of the largest and financially strongest With-Profits Funds in the UK. I believe the size, strength and diversity of our Fund makes us stand out from the crowd. We will continue to do our best to generate the steady returns you are looking for over the medium to long term.
Thank you for continuing to invest with us.
Managing Director, Retail Life & Pensions