Prudential Cuts Final Bonuses
by Gill Montia, www.insurancedaily.co.uk
Prudential has announced that it is reducing final bonus rates on its with-profits policies by between 5% and 10%
The insurer says it is responding to the downturn in world markets and the continued poor investment environment.
However, Pru’s with-profits funds have been holding up relatively well during the credit crisis and some policyholders will see a 3% year-on-year rise in the value of their investments, while a fall of up to 2% is forecast for others.
According to the company’s chief actuary, David Belsham, Pru’s with-profits funds have been managed to provide fair bonus rates during a market downturn and policyholders will see only a small change in their year-on-year policy values.
Customers who need to surrender their policies before maturity will continue to pay exit penalties that are individually assessed. These are likely to average around 4%.
Policyholders with with-profits endowments, with-profits annuities and individual pensions taken out before May 1987 are not affected by any of the changes and investors who have held a policy for five years or more can still withdraw up to £25,000 during any 12 month period, without incurring an exit penalty.
Pru has one of the UK’s strongest with-profits funds which contained a surplus of £6.2 billion at the end of September.