Pru to seek a possible reattribution
Latest news about the proposed reattribution of Prudential's inherited estate
We announced on 15 March 2007 that we are exploring the possibility of a reattribution of the inherited estate of Prudential's With-Profits Sub-Fund.
The inherited estate is part of the With-Profits Sub-Fund. It is essentially an amount of money in excess of the amount we expect to pay out to existing policyholders invested in the With-Profits Sub-Fund. It has built up over many years from a number of sources, including contributions by shareholders, and it provides working capital to support current and future business.
What does this mean for policyholders now?
What is a With-Profits Fund?
What do we mean by a reattribution?
What happens next?
Eligibility Date
Do you have questions?
What does this mean for policyholders now?
Reattribution is a complex and time-consuming process and will take at least a year to implement if it goes ahead.
Policyholders need take no action at this time. We will make a further announcement if a decision is made to go ahead with a reattribution.
What is a With-Profits Fund?
A with-profits fund is a fund in which the premiums paid by with-profits policyholders are pooled together. The fund provides a balanced mix of investments and aims to achieve a fair return over the medium to long term. Policyholders invested in the fund share in the profits, by addition of bonuses to their policies.
The possible reattribution affects Prudential's With-Profits Sub-Fund.
What do we mean by a reattribution?
The proposed reattribution would involve eligible policyholders with investments in Prudential's With-Profits Sub-Fund being asked to agree to the reattribution, in lieu of sharing in any possible future distribution from the inherited estate, the amount and timing of which are very uncertain. In return, they would receive a one-off payment, paid for by the shareholders.
While the inherited estate would continue to support the With-Profits Sub-Fund it would then be able to be used more flexibly to support the development of Prudential's business, to the ongoing advantage of all policyholders and shareholders.
We have announced only that we are exploring the possibility of reattribution and no decision has been made yet to go ahead. The size and timing of any payments will only be determined if reattribution does proceed and therefore cannot be known for some time.
What happens next?
We will only move ahead with the re-attribution if we believe there are benefits for policyholders and shareholders.
The Financial Services Authority (FSA), our industry regulator, provides guidance on reattribution. Part of this guidance includes the appointment of an independent Policyholder Advocate (PHA). The PHA is an independent person, who if appointed, will represent with-profits policyholders throughout the reattribution process and negotiate with Prudential, to ensure that policyholders receive a fair deal from the process.
We have nominated Peter Bloxham, a former partner at Freshfields Bruckhaus Deringer, a leading international law firm, as Policyholder Advocate and the Financial Services Authority has approved his nomination. He will be appointed only once Prudential is fully satisfied that a reattribution is in the clear interests of both policyholders and shareholders and the Financial Services Authority has considered the outline of any reattribution scheme.
The initial discussions with the PHA and FSA are proceeding well and if a decision to proceed is made, an appointment of the PHA could be expected in 2008.
In the meantime, the Policyholder Advocate has established an independent office and appointed a team of legal and actuarial experts to help him in his role, familiarise himself with the reattribution process and prepare detailed plans for consultation with policyholders.
Eligibility Date
For a policy to be eligible, we've proposed with-profits policies will need to have been held in the Prudential With-Profits Sub-Fund on the Eligibility Date (14 March 2007) or have the right to switch into the With-Profits Sub-Fund on that date. Policies will also need to be held at the Effective Date of the reattribution, which is currently unknown.
New with-profits policies taken out after that date will not carry any interest in any possible future distribution of the inherited estate in the With-Profits Sub-Fund and therefore will not qualify for any payment from this potential reattribution of the inherited estate, if it happens.
Existing policyholders who increase their with-profits investments (through, for instance, irregular premium payments or by switching investments into the With-Profits Sub-Fund) after this date should also be aware that this is unlikely to increase the size of payment to which they may be entitled from this potential reattribution of the inherited estate, if it happens.
Existing policyholders who reduce their with-profits investments (through, for instance, surrendering their policy, transferring all or part of their investment out of with-profits, taking their pension benefits early, or stopping making payments to their policy) are likely to lose any entitlement they may have to receive a payment in connection with the reattribution, or reduce the amount of the payment from this potential reattribution of the inherited estate, if it happens.
You should be aware that the eligibility rules described above are subject to agreement with the Policyholder Advocate, taking account also of the views of the Financial Services Authority.
In the event that this reattribution does not proceed, new policies taken out and increases to with-profits investments made after the Eligibility Date will count towards a policyholder's participation in any possible subsequent reattribution or distribution of the inherited estate in the same way as any other with-profits policy or investment.
Do you have questions?
If you have any questions on the reattribution proposals, you can call our dedicated Reattribution Service Centre on 0845 300 2641*, 8am-6pm Monday to Friday. Callers from overseas should dial our main switchboard on 00 44 1786 448844* and select the option to be connected to the Reattribution Service Centre. Alternatively you can write to us at Prudential, Stirling, FK9 4UE.
You can find a copy of the press releases made using the links below:
View the 15 March 2007 press release 'Prudential considering a reattribution'
You can also visit the website for the Policyholder Advocate at www.prupolicyholdersadvocate.com. Please note we do not accept any responsibility for content on external websites.
*Calls may be monitored or recorded for quality and security purposes.