Prudential Flexible Life Plan - standard cover

Snap_dragon

My aunt, who is currently 2 months shy of her 95th birthday, took this policy out in 2000, life sum assured £100,000 for an annual premium of approx. £3850. Originally with Scottish Amicable European, it became Prudential International around 2002. According to the documents, she was invested in 4 funds with 10 policy numbers.  She has paid the £3850 premium each year and is currently paid up until 1st April 2022. 
Since Oct 21 I have been tasked with assisting her to manage finance.  I have gone through the policy paperwork and can see she received a letter in April 2020 informing her  the premium had to increase to £12519.09 p a in order to maintain the level of cover and that this " should " be relied upon for the next 5 years only. Alternatively she was offered the option of increasing the premium to £26159.07 pa which "should" be sufficient to support the chosen level of life cover throughout her life. My aunt wrote a letter of complaint, in which she requested  her premium remain at the original level. The Pru investigated her claim but declined to uphold it, referring her to the ombudsman, once their process had been exhausted. My aunt lost hope at this point, saying she had  lived too long, so did not take further action. 
She and her trustees have just  received notification 12 Jan 22  advising that the fund value will reduce to zero in approximately 1 year, with the current level of cover expected to cease on 1 Oct 22.  After carrying out their review, the current value of the plan is now £5800 ...(this is not the encashment value - it is likely to be less after charges) The Pru give 3 options:
1. Do nothing and the plan and protection cover ceases 1.10.22
2.Increase annual regular premium to £26,629 for full life assured sum
3. Reduce cover to £18,241 and pay £3850
Both my aunt and the trustees are horrified, with the choice they face
The Pru asks for their options form to be returned within 6 weeks, otherwise no change is assumed.
So my question... Is it possible to determine from the annual unit statements, whether or not the funds were managed for optimum client benefit? I note that some names of the funds on the statement have changed.  The plan took 17 years to reach its highest total cash in value of  £21,676. Thereafter dropping dramatically to the current value of £5800.  Bearing in mind some 80k in premiums have been paid over the last 20 years, it seems outrageous that the cash in value will be less than £5000. How does one go about checking how the money was managed?

dunstonh

 Originally with Scottish Amicable European, it became Prudential International around 2002.

Was there a reason at the time she used an offshore company and not a UK company?  i.e. was she non-resident in the UK?

 have gone through the policy paperwork and can see she received a letter in April 2020 informing her  the premium had to increase to £12519.09 p a in order to maintain the level of cover and that this " should " be relied upon for the next 5 years only.

These policies typically had 10-15 years without a review and thereafter a 5 year review point.

So my question... Is it possible to determine from the annual unit statements, whether or not the funds were managed for optimum client benefit?

The funds are not managed for optimum client benefit.  They are managed as a collective in line with the fund objectives.   Whether the fund is right for the person or not is down to the individual or their adviser (if they use one).   e.g. if you invest in a UK equity fund then you get a fund that invests in UK equities.   Whether that is right or not for you is nothing to do with the fund manager.

  I note that some names of the funds on the statement have changed. 

Probably through rebranding and mergers.  Each time your mother would have been written to telling her about it.  And where mergers took place with a range of alternatives available they would have offered a default fund but made her aware there she could pick alternatives.

 The plan took 17 years to reach its highest total cash in value of  £21,676. Thereafter dropping dramatically to the current value of £5800. 

This is quite important information as it suggests the initial period was set up with a high target growth rate being required to keep the monthly cost lower.   As gross returns fell over the years, the high target growth rate would not have been achieved and they would have had to eat more of the fund to pay for the sum assured.     Especially if the sum assured was not reduced or the premiums were not increased.

Bearing in mind some 80k in premiums have been paid over the last 20 years, it seems outrageous that the cash in value will be less than £5000.

Unfortunately, this type of plan went niche around the mid-90s and obsolete by around 2000.   

The problem is not really the product but how investments and the economy did over that period and the fact she lived far longer than expected.     I suspect the low initial premiums for 15 years were done on the basis that it was estimated that she would die within that period.   However, she didn't.

And with review points every 5 years, the insurer is factoring in £100k sum assured for a 94 year old.  That is not going to be cheap.

How does one go about checking how the money was managed?

You dont because it is completely irrelevant to what has happened.

Snap_dragon

Thank you for your speedy informative response. 

 Originally with Scottish Amicable European, it became Prudential International around 2002.

Was there a reason at the time she used an offshore company and not a UK company?  i.e. was she non-resident in the UK?
My aunt has always been resident in the UK, 

The problem is not really the product but how investments and the economy did over that period and the fact she lived far longer than expected.     I suspect the low initial premiums for 15 years were done on the basis that it was estimated that she would die within that period.   However, she didn't.

If the problem is not the product, but how the investments and the economy did.. is it possible to actually request evidence as to how those investments performed, rather than just rely on an annual unit statement?  Surely if the investments had performed better, the encashment value would be higher?