Prudence account

JollyNolly

I've got about £6400 in a Prudential savings account, but I have no ISAs. So the plan was to move as much as possible into an Alliance & Leicester ISA this year and get the 5.2% there. However, I've just rung up the Pru and guy there tells me that I'm getting a "regular bonus" of 3.25% net, and a "final bonus" of 2.5% net, which he tells me is a total of 5.75%. As the A&L account pays 5.2%, does this mean I'm better off leaving it where it is? And what's the difference between a "bonus" and normal interest anyway?

grumbler

JollyNolly wrote:

...5.75%. As the A&L account pays 5.2%, does this mean I'm better off leaving it where it is?

5.75% AER gross is 4.6% AER net for basic rate taxpayers. ISA interest is tax-free. If you want to move the whole amount to ISA, hurry up. You can put only £3K before 5th of April and only £3K after.

And what's the difference between a "bonus" and normal interest anyway?

I think you should read your paperwork or phone Pru again ...

dunstonh

Are you talking about the prufund or a savings account? The prufund is an investment with some capital security but it is not a savings account. It does offer greater potential for growth than a savings account.

EdInvestor

THis appears to be an investment bond, not a savings account.

It is invested in the Pru's With-profits fund and features the usual horrific charges.

There is no point IMHO in taking a risk to achieve what you can get safely in cash.

However they will probably charge you a penalty if you move the money before maturity.

JollyNolly

It is a savings account, at least that's what it says on the tin, although it does mention "with profits" too. Surely the 5.75% is net?? If so, doesn't that make it a better deal than the A&L ISA at 5.2%???

dunstonh

It is invested in the Pru's With-profits fund and features the usual horrific charges.

The Prufund is not a traditional With Profits plan. It is also not a savings plan. It is a smoothed investment fund with average charges.

There is no point IMHO in taking a risk to achieve what you can get safely in cash.

Policyholders in the Prufund got between 10 and 15% growth last year. Please can you provide details of a savings account that can do that?

However they will probably charge you a penalty if you move the money before maturity.

There is no maturity date on it. It's open ended. There is an inital 5 year step down penalty though but no intial charges.

JollyNolly

Dunstonh - do I take it you think I should keep the account?

EdInvestor

You have put your money in a risk-based investment whereas you appear to think that it is going into a savings account.

When did you start this plan and how much are you paying into it per month?What is the surrender value of the plan if you cashed it in now?

Step one would be to find out if you have made a loss and if so, to then consider making a misselling complaint against whoever sold it to you.

If this complaint was successful you would get a return of capital/premiums plus interest net of tax, minus the surrender value of the policy.

dunstonh

Step one would be to find out if you have made a loss and if so, to then consider making a misselling complaint against whoever sold it to you.

How on earth can you suggest that this was a mis-sold product? What grounds for complaint can you see?

Also, not one person who has commenced a Prufund investment has made a loss to date.

Dunstonh - do I take it you think I should keep the account?

Unlike Ed who has chosen to jump to an extreme and make many assumptions, I am not sure what product you are talking about.

Prudential have a with profits fund, Prufund and did issue some savings accounts in the past. It is impossible to tell from what you have posted so far which you are in. The terms and features of those three products are very different and suit different goals.

The with profits investment with Pru is not too bad. Its a little old fashioned now but returns over the last 5 years have beaten bank or building society accounts and there is some degree of capital protection within the investment.

The Prufund is an award winning product and Pru's successor to the old with profits investment. It has more capital security options, no MVR possible and rates of return based on equity investments giving it higher potential for growth than a savings account whilst offering a bit more security than going directly into the stockmarket yourself.

The savings accounts are just like most postal savings accounts.

JollyNolly

Okay, here's the details I can find - the account is called "Prudence Savings Account". We apparently opened it in September 1994, and have been paying in £40 every month since then. As far as I can remember, we've only withdrawn from it once, that was £500 last August. I rang them yesterday, and the guy I spoke to told me that we would get £6454.34 if we cash it in now, but tried to discourage me from moving it to an ISA because of the "bonuses" quoted above, which I still don't understand.

dunstonh

Right, we can rule out Prufund, so ignore all references to that.

I checked some archives and found it is a legacy policy usually sold by the Prudential salesforce back in the 80s/90s.

It is not a savings account in the deposit range (ie bank account) but a low/medium risk product. The documentation issued then does show the usual investment risk warnings (could get back less etc).

It appears to be an open ended investment/savings plan with no penalties to withdraw funds after the first 5 years and no Market Value Reduction currently being applied on the first £25,000 withdrawn in any 12 month period.

The bonus is declared before charges and the bonus of 3.25% is guaranteed but the 2.5% can fluctuate and be clawed back. Last year the interim bonus was set around 2.5% but by year end was actually a lot more so gave more than 5.75%.

It cannot really be compared directly with a cash ISA as it is not a savings account but an investment. It is however, a cautious investment and low charged for the type it is. It offers greater potential for returns than the Cash ISA with a long term average likely to be around 2-3% p.a higher. However, there will be short term volatility from time to time which means you could get less bonuses than the interest rate in various years. Indeed, from 2002-2004 that would have been the case. However, the other years would have been higher.