Prudential Flexible Life Plan

mark55man

My OH and I (and OH Sister and spouse) are starting to take on Power of Attorney responsibilities for my FIL by mutual agreement.  He is in good health but maybe just showing signs of age in clarity of thinking and memory

One thing that requires action on by the end of the month is this years renewal premium for his Prudential Life Plan Cover - this premium is 15% up for a guaranteed 7.5% increase.  So that's a payment this year of £10K or so to add £20K to the covered value that will be paid in trust - primarily to any IHT (although based on initial investigations) I think the amount insured is now very much greater than needed .  So that seems like a good deal.  However given based on family history he may have another 10 years and hopefully more - I was a little worried when I googled the product and found mainly concerns about being locked in and effectively wasting his money.  

There is precious little information on the nature of the cover that I can find online so I was hoping for some information on
* Is this a straight pay your premium or lose the cover, or is there a inbuilt value - the renewal refers to a balanced managed (Sterling) fund which makes me think the latter
* What is the general advice - to keep paying the premium - as it is currently affordable and seems to be making a positive return.
* I guess my worry is with no control over premium increases where will it go from now on 15% this year and every year would soon net out the returns

Any education / suggestions on this welcome - I see  the options
* Fix the cover (ie refuse the increase cover)
* Pay up
* Stop completely

Other factors - widowed pre 2007 and no family dramas so everything will be equitable and sensible.  Plus should not need to be said, but obviously its his best interests and financial outcomes we want to preserve.  He is comfortably off with sufficient savings so this payment will not cause shortfall elsewhere 

dunstonh

 I was a little worried when I googled the product and found mainly concerns about being locked in and effectively wasting his money. 

The problem with googling things like this is that you have peoples opinions based on their knowledge and their circumstances and their version of the plan (there were multiple ways to set these up).  Some comments will be far from the reality of the situation.

* Is this a straight pay your premium or lose the cover, or is there a inbuilt value - the renewal refers to a balanced managed (Sterling) fund which makes me think the latter

It is an investment backed whole of life assurance.   It went obsolete around the mid 90s.   If the person no longer needs life assurance then you would question whether it is worth keeping it or not.  Or if they were in good health and can replace it with a modern alternative that meets their objectives.   However, if they need it and health prevents an alternative, then you have to make a judgement call.

The death benefits are the higher of the sum assured or the investment value.   
Cover remains whilst premiums are being paid.  Although a number of providers did have a maximum age for premium being but retaining benefits. i.e. if you get to age 85, they will not collect premiums after that but you would retain the benefits.   However, I cannot recall if this plan does that or not.

* What is the general advice - to keep paying the premium - as it is currently affordable and seems to be making a positive return.

1 - you cannot get general advice on the internet.
2 - there would not be general advice to give as there is insufficient information to give it.  There is no rule of thumb/one-size-fits-all answer to this.  It depends on circumstances and the version and options selected at the outset.

* I guess my worry is with no control over premium increases where will it go from now on 15% this year and every year would soon net out the returns

The review points are every 5 years and typically, you would expect the next review to have a larger increase than the previous one.  Not always but its a fair expectation.

mark55man

Thank you @dunstonh - I am coming in only with a little history, but what you have said is reassuring, and helpful.  We think (tests underway) that there may be more than old age behind his increasing frailty so its unlikely he is a good candidate for modern alternatives.  The five year review observation is also helpful as my fear was them escalating annually beyond return,

At current rates (premium and guaranteed cover increase) I am thinking that with a guaranteed increase of 2x the premium that represents a better return on the money than NS&I where a good chunk of his savings are placed.  We can think again in 5 years when things should be clearer medically

Also grateful for the observation about higher of insured value and investment growth.  That is reassuring that the plan will still do what he intended for us all.

I'll leave it there for now, but thinking that my likely course of action is to continue with the policy, but I will do a little more research on alternatives.  In a policy like this how much of the premiums are likely to be taken by the insurer and how many make it into the investments.  Sorry if naive question - this is the first I have seen of this type of product