Prudential with profits:

bilbo51

DavidLaGuardia wrote: »

GAR: (noun) members of the Lepisosteidae, a family including seven living species of fish in two genera that inhabit fresh, brackish, and occasionally marine, waters of eastern North America.?

For the love of Riley cut the JARGON!
Guaranteed Annuity Rate

We all knew what he meant.

Who's Riley?

DavidLaGuardia

bilbo51 wrote: »

We all knew what he meant.

Who's Riley?

1. My comment was meant in good humour. We all can be guilty of using jargon that not every reader in this forum will understand. Acronyms are not known to everybody.

2. Life of Riley (Hiberno-American saying) an easy and pleasant life.
> Love of Riley: the pursuit of the same.
A none offensive alternative to "for the love of [insert deity of choice]"

3. As for speaking for every lay person, not only contributing to these discussions but reading for help, isn't it somewhat presumptive of you to start "We all knew......." ?

magpiecottage

srcandas wrote: »

Ah I see. So you are saying it is designed to report good growth early on and then that in the years before retirement it should lose value as they recover the cost of the guarantee?

No it will not lose value, it is simply guaranteed to reach a certain figure - and every time an annual bonus is added, the guaranteed figure is added to.

However, you can also get a terminal bonus. This is not guaranteed and can fall.

And that if I let it run after I am 60 it will start to grow in value or will it simply continue to lose value?

That would depend on how it is invested at that time. If it has a guaranteed annuity rate attached to it then it may be worth taking advantage of it.

If not, it is probably better to speak to an Independent Financial Adviser, who can recommend products from the entire market, as it is unlikely that your current provider will then be able to offer the best value.

bilbo51

DavidLaGuardia wrote: »

1. My comment was meant in good humour. We all can be guilty of using jargon that not every reader in this forum will understand. Acronyms are not known to everybody.

2. Life of Riley (Hiberno-American saying) an easy and pleasant life.
> Love of Riley: the pursuit of the same.
A none offensive alternative to "for the love of [insert deity of choice]"

3. As for speaking for every lay person, not only contributing to these discussions but reading for help, isn't it somewhat presumptive of you to start "We all knew......." ?

I think you take my (unvoiced) point.

srcandas

magpiecottage wrote: »

No it will not lose value, it is simply guaranteed to reach a certain figure - and every time an annual bonus is added, the guaranteed figure is added to.

However, you can also get a terminal bonus. This is not guaranteed and can fall.

But as you can see from the figures it is losing value. It is reducing in value. And this according to the Pru is in years when their expert investors have done very well !!!

And the terminal bonus has halved???

magpiecottage wrote: »

That [future growth] would depend on how it is invested at that time. If it has a guaranteed annuity rate attached to it then it may be worth taking advantage of it.

It has a GAR of 9.3% and that will rise as the years pass. Sounds attractive if the Pru does not continue to lose money during good years (I hate to think what would happen during bad years :eek:).

In all seriousness do you think the type of product justifies loss of value during good years before one even considers inflation? I'd appreciate your reply as on 27/8 I will cut and run with what little remains and investigate the minimal chance I have of pursuing an investigation. I cannot do it earlier as I am sure the Pru could reduce my funds even further.

And beyond all this what explanation could there be for a failure of their computer system to not give values that I and their staff know are normally available (ie. have worked in the past") and expect now to work? As a person with 40 years of IT experience who has seen the internal systems of the Pru this worries me the most. Could it be a piece of code

if ( time_to_retirement < 2 ) { print 0 )
else
{
qry ..................................
}

dunstonh

But as you can see from the figures it is losing value. It is reducing in value.

Is it a unitised with profits plan or a conventional with profits plan to which there is a sum assured where bonuses are added? If the latter, then some of your contribution goes towards that base sum assured.

With old fashioned plans with a sum assured if you stop paying into them that sum assured is reduced. Some of these old plans also have guaranteed minimum maturity values. These can be highly valuable to you but not to the insurer. The insurer will often add little or no bonus on those as they have no real hope of hitting that minimum maturity value. Many people have transferred out of these plans without realising what they have given up as the insurers dont go out of their way to tell you.

chris1

dunstonh wrote: »

Some of these old plans also have guaranteed minimum maturity values. These can be highly valuable to you but not to the insurer. The insurer will often add little or no bonus on those as they have no real hope of hitting that minimum maturity value.

That explains the With profits plan that I have seen, where there was a Sum Assured, which had a few small annual bonuses added in the early years, then for the final TEN YEARS zero annual bonuses and zero terminal bonus, but a 9% guaranteed annuity rate at the end.

dunstonh

chris1 wrote: »

That explains the With profits plan that I have seen, where there was a Sum Assured, which had a few small annual bonuses added in the early years, then for the final TEN YEARS zero annual bonuses and zero terminal bonus, but a 9% guaranteed annuity rate at the end.

When there is a basic sum assured or guaranteed sum assured (which is typically on S226 RACs) you effectively have three parts to the return

1 - the basic sum assured
2 - the annual bonus rate (reversionary bonus)
3 - the final bonus rate (terminal bonus)

So the premium goes to those three things. The basic sum assured can often be around 1/3rd of the value (or thereabouts). So, effectively you could say that 1/3rd of the premium goes towards that.

These old style plans really do not fit with modern forms of disclosure and transparency but more often than not you dont complain about them as you stand to gain a lot from them. They were never designed to show things that people request nowadays (ie. current value) as they were built in a different era to cater for different requirements.

If you factor in the GAR as well, then a GAR that is 50% higher than open market rates would require any alternative to double in value just to pay the same amount. Usually you find the current value is really a transfer value as there is no way they can calculate a current value. So, it can understate the actual position compared to what it may do if left to maturity. I have seen S226 with zero bonus still go up in value each year as the transfer penalty went down each year.

Indeed, here is an example. It is with Pearl and has a GAR and a guaranteed minimum maturity value. The minimum maturity value is £82,500. Illustrations in 2004 had a value of £27,435 but in 2007 it was £46,169. In 2009 it was £46,265 (not a big jump but final bonus had been pulled but penalty had reduced). Still projecting £82,500 on lower and higher basis and still paying zero annual bonus but some final bonus. Yet in three years, it had nearly doubled in value. He can take it in 6 years and he will get £82500 plus a GAR of 9.6%.

If he only looked at the value and the annual bonus in isolation, all those guarantees would be missed.

srcandas

chris1 wrote: »

That explains the With profits plan that I have seen, where there was a Sum Assured, which had a few small annual bonuses added in the early years, then for the final TEN YEARS zero annual bonuses and zero terminal bonus, but a 9% guaranteed annuity rate at the end.

But at the end of the day the performance even allowing for guarantees is close to pathetic. 9% of something reduced by 75% is not too good.

Dunston when I am back in the UK I will read the docs and tell you the details. To be honest I just accept that "c'est la vie" and thankfully my other pensions Scottish Equitable, Scottish Widows and Aegon have given fair return for investment.

But I must say now I have everything under my control in SIPPs and I will lose the Pru shortly I feel such freedom. Taking on board help from here, having read the books (including monkey with the pin), and applying commonsense I am very happy to accept any bad decisions I may make. But I seriously doubt, given the freedom and reduced costs, I can possibly lose pot value at the level the Pru can achieve. And never will my computer system (trustnet and hl) tell me they unfortunately cannot tell me the value of my funds :cool:

dunstonh

But I seriously doubt, given the freedom and reduced costs, I can possibly lose pot value at the level the Pru can achieve.

Pru have a very good reputation and most investors would be happy to mirror what they achieve. (pru as in Pru original policy and not one of the companies they took over)