Bonus Declaration 2009
Dear Policyholder,
The past 12 months have been remarkable. We've seen the worst stock market conditions in 70 years. Meanwhile, interest rates in the UK were cut to 1% in February, the lowest level in the history of the Bank of England, which dates back to 1694. In these difficult times, we're pleased to have provided some protection for your investment in our With-Profits Fund.
We've been paying With-Profits bonuses to our customers for more than 100 years, through other difficult times like world wars and recessions. This experience has given us confidence in our approach. Our objective is to look after your money carefully and deliver consistently strong performance over the long-term even when times are difficult.
Past performance is not a reliable indicator of future performance.
Please remember that the value of an investment may go down as well as up and the fund value in the future may be less than the payments you have made. For investments in the With-Profits Fund, the value of the Policy depends on how much profit the Fund makes and how we decide to distribute that profit.
Final bonus may vary and is not guaranteed. A Market Value Reduction may be applied, this will have the effect of reducing your fund value.
The FTSE All-Share total return index fell by 29.9% in 2008, a stark reflection of the economic turmoil around the world. In comparison, our With-Profits Fund's fall of 19.7% and the strength of our fund has provided some protection for our policyholders. The With-Profits Fund uses a process known as smoothing to offer some protection against the downs of the stock market. We hold back some of investment returns in the good years to boost final bonus rates, when investment returns are low. This year values on our accumulating With-Profits policies are better than the Fund's return, only typically falling by between 6 to 10%. More detail on what this means for your policy will be provided in your annual statement.
With-Profits investing is designed for the long-term and our With-Profits Fund demonstrates this, with a return of 31.7% over the past five years and 67.2% over ten years (to 31 December 2008). This compares well with our competitors and the FTSE All-Share total return index (18.7% over 5 years and 12.4% over 10 years).
A bright future
Our With-Profits Fund is one of the largest and financially strongest in the UK with one of the highest ratings from independent agency Standard & Poor's (as at December 2008) and funds under management of £56.7 billion*. Our overriding priority has always been to maintain the long term financial security of the Fund to deliver strong performance and protect our policyholders. With our expert team of investment managers we are in a strong position to take advantage of investment opportunities as they arise.
Bonuses are the way you receive your share of the profits of the Fund. Different types of policies receive different bonus rates. You can learn more about the return on your policy and its value in your annual statement.
Thank you for investing with Prudential and for your continued trust in our management of your With-Profits policy.
Barry O'Dwyer
Managing Director, Retail Life and Pensions
Prudential With-Profits performance is gross of tax, before charges and the effects of smoothing.
*All figures correct at 31 December 2008. Source - Prudential.
All the return figures quoted for the fund are before tax.
