With-Profits Bonus Declaration February 2021

Our With-Profits Fund delivered a small positive return in 2020 despite a highly unusual year for global investment markets.

While the longer term performance of the Fund remains strong, there is still considerable ongoing uncertainty in relation to the future outlook for global economies and the investment markets, which is reflected in this year’s bonuses. This means annual bonus rates will be reduced slightly for some products and maintained at the same level as last year for other products. 

The final bonus will be lower for the majority of customers but will continue to be paid. This means that overall plan values will, for the vast majority of customers, be maintained or show small increases compared to last year.

How we look after your money

We invest your money in the Prudential Assurance Company Limited With-Profits Fund. This is the largest and one of the financially strongest with-profits funds in the UK. The size and strength of our Fund allows us to invest in a very wide range of assets and individual companies.

Our aim is to secure the highest total return for the Fund (after any tax and investment expenses), while maintaining an acceptable level of risk and protecting you, our With-Profits customers.

How our Fund performed

The table below shows the returns for The Prudential Assurance Company Limited With-Profits Fund over the last 1, 5 and 10 years.

Performance of our With-Profits Fund in the 1, 5, 10 years to 31 December 2020

Fund

1 year Fund return %

5 year Cumulative
Fund return %

10 year Cumulative
Fund return %

5 year Annualised Fund return %

10 year Annualised Fund return %

Prudential With-Profits Fund (after tax)

1.5

33.2

77.9

5.9

5.9

Prudential With-Profits Fund (before tax)

1.7

39.3

94.5

6.9

6.9

Source: Prudential. These values are before charges and the effects of smoothing and are for the main asset pool in our With-Profits Sub-Fund, which is relevant to the vast majority of our customers.

For investments in our With-Profits Fund, the value of your plan depends on how much profit the Fund makes, and how we decide to distribute it. When we take these factors into account, the bonuses we’re adding to your plan won't reflect the performance of the underlying fund exactly. You can find more information in your yearly statement.

We can’t predict the future so past performance isn’t a guide to future performance. The value of your plan can go down as well as up so you might not get back the amount you put in.

How we set our bonus rates

For annual bonus rates, we look at the economic outlook and the returns we expect our investments to earn in the future. The annual bonuses we’ve announced will help the fund retain investment flexibility to cope with market volatility. 

For final bonus rates, we aim to ensure the total return on customers’ plans, represents a fair share of the Fund’s profits earned over the lifetime of their plans. This is after taking into account, for example, charges, the effects of smoothing and any applicable tax. Your final bonus isn’t guaranteed.

Our final bonus rates include, where applicable, additional money we shared with some of our With-Profits customers as part of last year’s Bonus Declaration. There’s a chance we might have to take back this extra money in future, to protect the interests of all customers and the financial strength of our With-Profits Fund. Unless something very unusual was to happen, we wouldn’t expect to have to do this.

How we apply a Market Value Reduction

Sometimes, we may need to apply a Market Value Reduction if you decide to take money out of your plan. This will depend on the type of plan you have. This will reduce your fund value, but we’ll do this to make sure you get a fair plan value.

How our With-Profits Fund is helping create a more sustainable world

We’re pleased to announce we’ve created a new, dedicated investment team, called Catalyst, ready to invest up to £5 billion of our £136 billion With-Profits Fund in innovative opportunities that are tackling environmental and social challenges across the globe. 

As you are invested in our With-Profits Fund then you’re already invested in many types of assets across the world. The £5 billion investment will help us find many more exciting opportunities for growth while helping to make the world a better place.

You can find out more details at pru.co.uk/catalyst

In 2021 we'll continue to manage the Fund in a prudent manner, just as we always have. 

Thank you for investing with us.

John Foley 
Chief Executive, M&G plc

 

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