AVCs with the PRU - which fund?

JohnieBoy

Can anyone help me?

I am trying to select from about 15 funds (classified in risk bands)offered by my wife's AVCs with the PRU. The low risk are essentially all of gilts, the medium low are of corporate bonds and a with profits, the medium are of balanced equities/bonds and of properties. Most say the aim is to buy M&G PP funds.

If I go on trustnet, I can find information on the various funds (performance, rating, etc), but unlike the other non PP funds I have looked at, there is no information on historic quartile positions.

So can anyone explain how (for example) the M&G PP All Stocks Corporate Bond Fund might vary from other M&G Corporate Bond funds, and why there does not seem to be any information on how its performance would compare.

Thanks

dunstonh

Pru tend to be poor on unit linked in-house funds (mainly equties as they are a bit better on fixed interest). Strange as they are so good on their with profits fund.

So can anyone explain how (for example) the M&G PP All Stocks Corporate Bond Fund might vary from other M&G Corporate Bond funds, and why there does not seem to be any information on how its performance would compare.

Different management. Just because they share the same logo, does not mean they are the same product. Jamie Hamilton manages the M&G PP All Stocks Corp Bond but Richard Woolnough does the M&G OEIC. Totally different investment strategies as well with no obvious overlap (both funds had different top 10 holdings for example)

I was able to find the fund data easily on Financial express analytics (effectively the paid for version of trustnet). Trustnet is a cut down version covering fewer investment universes. They are not going to give it all away from free when they can charge for it.

Any reason you are doing in-house AVC? (one assumes it is possibly the ability to use the AVC in conjunction with the main scheme with regards to tax free cash. if not, what is the reason?)

JohnieBoy

Thank you, Dunstanh.

I thought I had found funds with the same name, just the PP bit being different - but no. So OK, they are different funds.

But anyway, I hoped I could find some data to compare the M&G PP funds with their peers (like the rank info trustnet gives for non PP funds). Thanks for the info that I will have to pay for it!!!

And yes, the reason for doing an in-house AVC is mainly the tax-free lump sum (staying below the 25% limit of total pension fund means the whole AVC can be taken as a lump sum). But also, the in-house deduction from salary means the income tax refund will be done immediately via the payslip (Local Authority). Also the AVC will keep the taxable salary below the 40% threshold.

My problem is deciding which fund to go for. The low-risk AVC fund options are all strongly gilt based, and surely if interest rates rise (and surely they won't go down), the capital value of the funds should fall. That doesn't sound very low-risk to me.

For similar reasons, I'm not sure about corporate bonds funds, so do you think "with profits" would be more sensible? What with my mortgage endowment shortfall, I thought "with profits" should be avoided like the plague! Any additional assistance you could give would be much appreciated!

Thanks again

dunstonh

For similar reasons, I'm not sure about corporate bonds funds, so do you think "with profits" would be more sensible? What with my mortgage endowment shortfall, I thought "with profits" should be avoided like the plague! Any additional assistance you could give would be much appreciated!

Endowment issues are little to do with "with profits". If that was the case then you wouldnt see unit linked ones falling short. yet you do. The issue with endowments was basing target growth rates on what had been achieved for generations in an economy that was frequently boom/bust and high inflation. They failed to work to those target growth rates in the sustained low inflation period that had hardly any market falls for over a decade but when they came they came big time. Bigger than anything seen for generations. Normally I would say avoid WP (apart from a few niche clients where it fits). However, Pru do have a valid and viable WP fund that continues to perform and they continue to market and run it sucessfully. It is probably the only one you would consider nowadays. So, you cannot rule it out. If my choice was their in-house unit linked or the WP fund then I would probably go with the WP fund.

With Profits is unfashionable and gets bashed. That doesnt mean that there cannot be exceptions.

Pru are announcing their bonuses on 28th Feb. Why not see how they come out. The FTSE lost 5.6% last year. Check out how the WP bonus announcement comes out with and lets see if they remain viable.

JohnieBoy

Hi again

OK, I admit I was being a bit automatic in my reaction to "with profits" funds, but the Pru guide does say that WP funds are aimed at long term AVC purchasers. My wife has probably got 4 years to retirement, so would that affect anything? Maybe the "smoothing" of returns would be helpful anyway?

Thanks again

dunstonh

y wife has probably got 4 years to retirement, so would that affect anything? Maybe the "smoothing" of returns would be helpful anyway?

In that case, the WP fund may be ideal as there is no MVR at the selected retirement age and you wont get back less than you pay in. The bonuses are likely to beat cash rates. So, it may well be the right option here.

ermine

My wife has probably got 4 years to retirement

shouldn't she be avoiding the avoiding the stock market and moving into cash then? There seems to be a general principle that you need to be in the stock market for five years or more to smooth the volatility, and that you should gradually move into it (automatically done by regular savings) and gradually move out of it using a lifestyling profile, shifting a larger proportion of your fund to lower risk and you come closer to taking your lump sum.

edit - clashed with dunstonh. Defer to his comment on WP. What he said