Bonus Declaration FAQs February 2016

Annual/Regular and Final Bonuses are the way you receive your share of the profits of the Fund.

Who is affected by the Bonus Rates Announcement?

All Prudential customers who have a With-Profits element to their plan, except for investments made in any of the PruFund funds.

These include:

  • Prudence Bond and other investment bonds
  • International Prudence Bond
  • Prudential International Investment Bond
  • Prudential Personal Pension
  • Scottish Amicable Personal Pension
  • Prudential Savings Endowment
  • Scottish Amicable Savings Endowment
  • Prudential Mortgage Endowment
  • Scottish Amicable Mortgage Endowment
  • With-Profits Pensions Annuities
  • Former Equitable Life With-Profits Annuities
  • Flexible Retirement Income Annuity
  • Income Choice Annuity

What bonus rate will I get as a result of this year's declaration?

Annual/Regular and Final Bonuses are the way you receive your share of the profits of the Fund. Different types of plan receive different bonus rates. To see the Annual/Regular Bonuses for our With-Profits products please click here

How do I find out how the declaration impacts me?

We will send you a statement each year, which will show the impact of the bonus declaration on your Plan. To see the bonus rates declared for your product, click here

Is this Bonus Declaration a good indicator of what I might get back when my Plan matures?

While the returns of the fund are strong, there are a number of factors that affect the amount you get back from your Plan, which cannot be predicted. These include:

  • future investment performance
  • our charges and costs
  • costs of guarantees
  • smoothing*
  • tax
  • other business risks e.g. changes in regulatory requirements or taxation

*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.

Why is the return on my Plan different to the overall return for the With-Profits Fund?

Generally, the better our With-Profits Fund performs, over the medium to long-term, the more scope we'll have to pay bonuses. We aim to pay you a fair share of the investment return over the lifetime of your investment. Please remember that the total bonuses added to your Plan won't reflect the performance of the underlying fund exactly because of, for example, charges, the effects of smoothing and any applicable tax. Please see information specific to your Plan for further details.

How strong is the Prudential With-Profits Fund?

The Prudential Assurance Company Limited (PAC) With-Profits Fund 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 asset types and individual companies.

The Prudential Assurance Company Limited is rated AA for financial strength by Standard & Poor's, as at January 2016. This is one of the highest ratings currently given to any UK Life Assurance Company.

I have a Plan that was originally with Scottish Amicable, why are the returns different than those quoted for Prudential?

All ex-Scottish Amicable plans taken out before 1 October 1997 are invested in the Scottish Amicable Insurance Fund (SAIF). This is a separate Fund within the Prudential Assurance Company Limited's longer term fund and has funds under management of £5.7bn as at 31 December 2015. As this is a separate Fund the funds under management and returns payable are different.

The Scottish Amicable Fund's strength, and investment flexibility, comes from the financial support provided by the Scottish Amicable Capital Fund. This support has allowed the Fund to invest a significantly higher proportion of its investments in equities than would otherwise have been the case.

I have a mortgage endowment with Prudential - what does a red, green or amber letter mean for me?

The Prudential Assurance Company Limited is rated AA for financial strength by Standard & Poor's, as at January 2016.

If you have an endowment plan, you should have received regular letters over the last few years telling you whether your Plan is on track to repay your mortgage. These are called re-projection letters. The letters tell you:

  • Whether your Plan is still on track to pay out the amount needed to repay your mortgage at the end of the term
  • The amount of projected shortfall, if any
  • The options open to you
  • What further action you need to take.

In accordance with accepted industry guidelines we monitor how many of our endowment customers plans are and are not expected to meet their repayment targets. This is shown in your letter as 'red, amber or green', with green being satisfactory and likely to meet repayment targets (although this is not guaranteed), amber indicating a potential shortfall and red showing a shortfall likely - action should be taken.

I have a mortgage endowment with Prudential and have received a letter telling me that my endowment plan may not be enough to pay off my mortgage - what action should I take?

As a result of turbulent market conditions in recent years, the payouts of many mortgage endowment plans have fallen. This could mean that the amount you receive from your Plan may not be enough to pay off your mortgage, and you may have a shortfall. If you have had a letter from Prudential we understand that you may be concerned about what to do next.

The two main options open to you are:

  • You could consider using any savings or investments you have to pay off the part of the mortgage not covered by this plan.
  • You could ask your mortgage lender about the options you may have. This may include switching your mortgage to a repayment mortgage so that you can pay off the part of your mortgage which is not covered by this plan, or taking out a loan to cover the shortfall.

If your Plan is providing your only means of paying off your mortgage, we would recommend that you contact your mortgage lender as soon as possible to let them know that your endowment plan may have a shortfall. If you want more information you can write to Prudential, Lancing, BN15 8GB, quoting your Plan number.

What are your thoughts on future bonus rates?

Future bonus rates will depend on how well the Fund does in the future. The Prudential Assurance Company Limited With-Profits Fund 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.

The Prudential Assurance Company Limited is rated AA for financial strength by Standard & Poor's, as at January 2016. This is one of the highest ratings currently given to any UK Life Assurance Company.

Are you making changes to your Market Value Reduction (MVR) approach?

We are not currently planning any changes to our MVR approach. We regularly review our approach in the light of emerging market conditions and reserve the right to change this without notice. For more information on MVRs please see your product literature.