What is a With-Profits fund?
A with-profits fund is a pooled investment where your payments are added together with those of other investors.
We aim to secure the highest total return for the Fund over the long term (after any tax and investment expenses) while maintaining an acceptable level of risk and protection. In addition, we use our bonus process to smooth some of the extreme ups and downs of short-term investment performance for you.
Please note that the value of an investment may fluctuate and is therefore not guaranteed. You may not get back the full amount of your original investment. For investments in with-profits funds, the value of the plan depends on how much profit the funds make and how it's distributed.
What does the Prudential With-Profits Fund invest in?
Prudential's With-Profits Fund is invested across a broad mix of assets both in the UK and abroad. The assets include company shares, property, fixed interest securities, and deposits.
What are bonuses?
Bonuses are the way we allocate your share of the profits of the fund. There are two types of bonuses:
- Regular bonuses, which are normally added throughout each year. We can change the rate of regular bonus at any time without prior notice.
- Final bonus, which may be paid when you take money out of your plan. Final bonus may vary and is not guaranteed.
The company's bonus plan aims to give each planholder a return which reflects the earnings on the underlying investments over the period of their investment, whilst smoothing the peaks and troughs of investment performance.
What is smoothing?
The With-Profits Fund aims to smooth some of the extreme ups and downs of short-term investment performance in order to provide a more stable return. We do this by holding back some of the investment returns in good years with the aim of using this to support bonus rates in the years where the investment returns are lower.
Smoothing offers some protection against bad market conditions. However, bear in mind that smoothing will not stop the value of your plan reducing if investment returns have been low.
If you have a Unitised With-Profits Plan and take money out of the Prudential With-Profits Fund, we may adjust the value of your plan if the value of the underlying assets is less than the value of your plan including all bonuses. This adjustment is known as a Market Value Reduction (MVR). It is designed to protect investors who are not taking their money out and its application means that you get a return based on the earnings of the With-Profits Fund over the period your payments have been invested. For more information on MVR, please see the Market Value Reduction - a clear explanation guide.
We are not recommending one option over another or providing advice.