Your With-Profits Plan – a guide to how we manage the Fund

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Your With-Profits Plan – a guide to how we manage the Fund Powered By Docstoc
					Your With-Profits Plan – a guide to how we manage the Fund
PruFund range of funds

A Prudential With-Profits Plan is a long-term investment that:

>   combines your money with money from other planholders,

>   invests in the With-Profits Fund and

>   gives you the advantages of a well balanced mix of investments with some smoothing of investment returns.
It aims to give you the highest possible return over the time you have your Plan, while maintaining an acceptable level of risk to the Fund.


Contents                                         Aims of the guide
Page 2 What is a with-profits plan?
       How does the With-Profits                This guide explains briefly how the Prudential With-Profits Fund works and our current
       Fund work?                               approach to managing it.
       What is the Expected Growth
       Rate and how is it decided?              You may find it useful:
       What is smoothing?
                                                >   when you receive your yearly statements, (half-yearly statements for PruFund
Page 3   What may affect the value of               Investment Plan)
         your plan?                             >   if you receive an illustration of what you might get back from your Plan,

Page 4   What if you decide to move out         >   if you discuss your Plan with a Financial Adviser,
         of these funds?
                                                so please keep it in a safe place with your other Plan documents.
         What is the inherited estate?
         Where can you find out more?           This guide applies to Plans accessing the PruFund range of funds, which comprises:

                                                >   PruFund Growth Fund
                                                >   PruFund Growth Pension Fund
                                                >   PruFund Protected Growth Fund
                                                >   PruFund Protected Growth Pension Fund
                                                >   PruFund Growth and Income Fund
                                                >   PruFund Cautious Fund
                                                >   PruFund Cautious Pension Fund
                                                >   PruFund Protected Cautious Fund
                                                >   PruFund Protected Cautious Pension Fund.
                                                You may receive similar guides if you have more than one type of with-profits plan.
                                                More detailed and technical information about how we manage the Fund can be
                                                found in our Principles and Practices of Financial Management (PPFM) document,
                                                which is available on our website at www.pru.co.uk/ppfm. Printed versions are
                                                available on request.
                                                We will send you a revised copy of this guide if we make any significant changes to our
                                                principles or practices of financial management.




Applicable from January 2006                                                                                              continued overleaf
What is a with-profits plan?                        product, are set by the Prudential                  Like most stockmarket based investments,
>   It is a Plan that shares in the profits of      Directors having regard to the expected             the value of the underlying “funds”
    the With-Profits Fund. When you                 long term investment returns on the                 change daily, sometimes increasing and
    take money from your investment in              assets of the funds (which are referred to          sometimes decreasing. We aim to reduce
    the With-Profits Fund, the difference           as “funds”) in this guide.                          the impact of these movements over the
    between the value of the units                                                                      short term by using a smoothing process.
                                                    Your investment will normally benefit
    withdrawn and the investment you
                                                    from this growth rate on a daily basis,             What is smoothing?
    made to buy them (less our charges)
                                                    through an increase in the price of the             To describe the smoothing process we
    represents your share of the profits of
                                                    units you hold (known as the unit price).           use the terms “unsmoothed” and
    the Fund.
                                                                                                        “smoothed” when referring to prices:
                                                    When you invest, your money will first be
>   It aims to grow the money invested in
    your Plan over the medium to long
                                                    used to buy units in the corresponding              >   unsmoothed price is the value of
                                                    fixed rate accounts. Your money is then                 the underlying “fund” divided by the
    term. This should be considered as at
                                                    moved into the fund you have chosen on                  total number of units;
    least 10 years.
                                                    the next PruFund quarter date. The
How does the With-Profits Fund                      quarter dates are:                                  >   smoothed price is the same as
                                                                                                            the unit price. It increases by the
work?
                                                    – 25 February                                           Expected Growth Rate as
Money from all planholders is combined
                                                                                                            described above.
and invested in the With-Profits Fund,              – 25 May
which has a broad mix of investment                                                                     Every day the smoothing process checks
                                                    – 25 August
types, generally referred to as assets.                                                                 the gap between the smoothed price,
                                                    – 25 November                                       which is published, and the unsmoothed
Investment performance usually has the
                                                                                                        price which is not. If at any time the gap
biggest effect on the value of your Plan.           or the next working day if the quarter              is 10% or more, the smoothed price will
A fuller explanation of the factors that            date is a weekend or a public holiday.              be adjusted immediately to reduce the
may affect the value of your Plan is given
                                                    When your money is in the fixed rate                gap to 2.5%.
on page 3.
                                                    account and waiting to be moved into                When the Expected Growth Rate is set
What is the Expected Growth Rate                    your chosen fund on the next PruFund                at the start of each quarter, there is a
and how is it decided?                              quarter date, it will grow at the Expected          further smoothing process and if there
The Expected Growth Rates which are                 Growth Rate that applies to the fund you            would be a gap of more than 5%, the
published on our website at                         have chosen. Product charges will apply             smoothed price is adjusted to reduce
www.pru.co.uk every quarter for each                as normal during this period.                       the gap by half.




                            Value




                                                                                                                       Time
                                                      Smoothed Value            Unsmoothed Value



    This graph is for demonstration purposes only and does not represent actual performance or any particular time period. Its sole aim is to
    explain the smoothing concept.



 2 Your With-Profits Plan
Adjustments to the smoothed price can        There are many factors that will affect        b) Smoothing
be down or up, depending on whether it       the amount you get back from your Plan.           Smoothing, which is described
is above or below the unsmoothed price.      Some of the main ones are:                        on page 2, limits the immediate effect
The smoothed price after any adjustment                                                        of stockmarket ups and downs on
will increase at the Expected Growth Rate    a) Investment performance                         what you will get back from your Plan.
for the quarter.                                This usually has the biggest impact on
                                                the payout from your Plan.                  c) Our charges and costs
The unsmoothed price is not published.
                                                                                               We aim to keep the costs of
This avoids speculation over possible           It depends on several things,
                                                                                               running the business as low as
smoothed price adjustments (as                  including how much of the “funds”
                                                                                               possible and to allocate the costs
described above) and so protects                we invest in the different types
                                                                                               fairly across all planholders.
investors in these “funds”.                     of asset.
                                                                                               Our charges are taken by cancelling
There may be occasions where we have            The main asset types are:
                                                                                               units in your Plan. The Key Features
to suspend the smoothing process to
                                                – company shares                               document gives information about the
protect our With-Profits Fund and the
                                                                                               charges we make to your Plan to cover
clients invested in it. We may also             – property                                     our costs.
suspend the smoothing process if
unusually large volumes of money enter          – fixed interest securities
                                                                                            d) Transfers to our shareholders
or leave the “fund”. When this happens          – deposits.                                    Our shareholders provide capital to
your investment will rise or fall in line                                                      support the “funds”. They receive
with the unsmoothed price until the             We invest in a wide mix of these
                                                                                               some of the profits in return for this
smoothing process is reinstated.                assets, both in the UK and abroad.
                                                                                               support. They receive one ninth of any
For more information, please refer to           Over time, the relative performance            increase in the value of each plans'
your Terms and Conditions.                      of different types of asset varies a lot.      holding in the PruFund funds. This
                                                So our expert fund managers may                transfer is met by the charges taken
What may affect the value of                    change the asset mix with a view to:           from your Plan and is made when you
your Plan?                                                                                     take money from your investment in
We aim to be fair to all with-profits           – improving the long-term                      these “funds”.
planholders by balancing the interests of:        performance of the Fund or
                                                                                            e) Tax
>   holders of different types of plan          – reducing the risk level of
                                                                                               We aim to charge tax fairly across all
                                                  the Fund.
                                                                                               Prudential funds. Any tax we have to
>   customers starting plans at
    different times                             Overall, our investment approach aims          pay on the With-Profits Fund will
                                                to give you the highest possible return        reduce what you get back from your
>   planholders remaining in the Fund           while maintaining an acceptable level          Plan. Currently, there is no tax
    and those leaving the Fund                  of risk to the Fund.                           payable by the Fund on assets
                                                                                               backing pensions business, although
>   our shareholders.
                                                                                               this may change in the future. It is
The value of your plan may fluctuate                                                           allowed for in the Expected Growth
and there could be times when you may                                                          Rate where applicable. Your Key
not get back the full amount of your                                                           Features document will give more
original investment.                                                                           information on taxation.




                                                                                                                Your With-Profits Plan 3
What if you decide to move out of                      What is the inherited estate?                          Where can you find out more?
these funds?                                           As a long-established life assurance                   If you want more information about your
You may decide to take money from your                 company, Prudential’s With-Profits Fund                investment in with-profits, call us on
Plan for one of the following reasons:                 contains an amount of money in excess of               0800 000 000 or speak to your
                                                       the amount we expect to pay out to                     Financial Adviser. Calls to Prudential may
  >   to retire
                                                       existing planholders. This is known as the             be monitored or recorded for quality and
  >   to switch to another type of                     inherited estate. It has built up over many            security purposes.
      Prudential fund                                  years from a number of sources and it
                                                                                                              This guide aims to provide a summary of
                                                       provides working capital, to support
  >   to transfer your investment to                                                                          how the Prudential With-Profits Fund
                                                       current and future business.
      another company                                                                                         works for the funds listed on Page 1.
                                                       There are no plans to distribute the                   However, because we have kept it as
  >   to cash in your Plan.                            inherited estate to planholders or                     short as possible we have given you only
                                                       Prudential shareholders, other than as                 the most important information.
If you take money from some types of
                                                       required as part of the normal smoothing
plan in the first few years of an                                                                             We need to warn you that in the absence
                                                       process or to meet guarantees. We have
investment, other than regular                                                                                of all details you will not have a complete
                                                       no current intention of closing our With-
withdrawals, a surrender charge may                                                                           picture. If you do need a detailed technical
                                                       Profits Fund to new business, but if it did
apply. If a surrender charge could apply                                                                      guide to how we manage Prudential's
                                                       close, the inherited estate would still be
to your Plan, details are given in the Key                                                                    With-Profits business, please refer to
                                                       needed to support existing business.
Features document you received when                                                                           our Principles and Practices of Financial
you started the Plan.                                                                                         Management (PPFM), which is available
                                                                                                              on our website at www.pru.co.uk/ppfm.
                                                                                                              Printed versions are available on request

                                                                                                              In the event of any conflict between
                                                                                                              the two documents, the PPFM will
                                                                                                              take precedence.

                                                                                                              The Financial Services Authority gives
                                                                                                              general information about with-profits
                                                                                                              funds in the consumer section on
                                                                                                              its website:
                                                                                                              http://www.moneymadeclear.fsa.
                                                                                                              gov.uk/products/with-profits/
                                                                                                              with-profits.html
                                                                                                                                                                  WPGB0031 10/2009




                                                                  www.pru.co.uk

“Prudential" is a trading name of The Prudential Assurance Company Limited, which is registered in England and Wales. This name is also used by other companies
within the Prudential Group, which between them provide a range of financial products including life assurance, pensions, savings and investment products.
Registered Office at Laurence Pountney Hill, London EC4R 0HH. Registered number 15454. Authorised and regulated by the Financial Services Authority.

				
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Description: Your With-Profits Plan – a guide to how we manage the Fund