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.