PRU Personal Pension

kassy64

Hi, anyone know anything about Pru's personal pension and in particular the 'final bonus'.
My wife is expecting to cash in some of her Pru pension next year and the latest statement shows a 'final bonus' which makes up nearly 2/3rds of the overall pot. The summary boxes that go with it state that this bonus is not guaranteed and may or may not be paid at retirement. As this bonus makes up 2/3 rds of the pension pot how the hell can you make a retirement decision based on whether you will or won't get the bonus. She is awaiting a call back hopefully tomorrow to explain her options from Pru but would be nice to understand the 'final bonus' a bit more. Thanks

tacpot12

It's a good question you ask. In my experience the Pru are dreadful about explaining how the With-Profits fund works. I have a friend with a Pru Personal Pension that is all invested in the With-Profits fund, and have tried to get the Pru to explain it to him, with very limited success. Eventually, the Pru put him in touch with a tied Financial Adviser who are able to explain things satisfactorily. I am fairly sure that they said that the final bonus amount that appears on her statements will always be paid. When they say that "a final bonus may not be paid", what they really mean is that in a certain years you might not get any final bonus added to your final bonus figure. The figure that appears on your statements is the amount of final bonus that will be paid. 

Note that if she withdraws say half the value of her pension, she will get half of the amount she invested, half of the annual bonuses and half of the final bonus. The amount she leaves invested in the fund will continue to accrue annual bonuses, and the final bonus figure (which will drop to half on the next statement) may also continue to increase if the Pru pay final bonus amounts. 

Note also that the Pru might apply their Market Value Reduction (MVR) to any amount that she withdraws if the withdrawal does not happen on her on her selected retirement date. Given the recent collapse of the stockmarkets, the Pru might well be applying MVRs at the moment. She needs to ask if they will apply an MRV, ask how much it is, and consider whether she can wait for the stock markets to recover before making her withdrawal. She can also request that any withdrawal occurs on her selected retirement date if this suits her, as the Pru cannot apply an MVR on that date.

kassy64

tacpot12 said:

It's a good question you ask. In my experience the Pru are dreadful about explaining how the With-Profits fund works. I have a friend with a Pru Personal Pension that is all invested in the With-Profits fund, and have tried to get the Pru to explain it to him, with very limited success. Eventually, the Pru put him in touch with a tied Financial Adviser who are able to explain things satisfactorily. I am fairly sure that they said that the final bonus amount that appears on her statements will always be paid. When they say that "a final bonus may not be paid", what they really mean is that in a certain years you might not get any final bonus added to your final bonus figure. The figure that appears on your statements is the amount of final bonus that will be paid. 

Note that if she withdraws say half the value of her pension, she will get half of the amount she invested, half of the annual bonuses and half of the final bonus. The amount she leaves invested in the fund will continue to accrue annual bonuses, and the final bonus figure (which will drop to half on the next statement) may also continue to increase if the Pru pay final bonus amounts. 

Note also that the Pru might apply their Market Value Reduction (MVR) to any amount that she withdraws if the withdrawal does not happen on her on her selected retirement date. Given the recent collapse of the stockmarkets, the Pru might well be applying MVRs at the moment. She needs to ask if they will apply an MRV, ask how much it is, and consider whether she can wait for the stock markets to recover before making her withdrawal. She can also request that any withdrawal occurs on her selected retirement date if this suits her, as the Pru cannot apply an MVR on that date.

Thanks for attempting to explain this. Sure I read on her statement no MVR would ever be paid on her plan, will double check though.Thanks again.

dunstonh

s this bonus makes up 2/3 rds of the pension pot how the hell can you make a retirement decision based on whether you will or won't get the bonus.

The same as everyone else with a DC pension does.   You either risk it and hope for the best or you convert the amount to a cash fund.

Pru don't offer hardly any drawdown options on their legacy pensions and they have an in-house salesforce that has pretty high charges that will offer to do the work to put her in their modern plan.  However, that has higher charges than most as well.  So, be on guard for that.   Only some legacy Pru pension support partial UFPLS.

Albermarle

To add to the above, we have regular first time posters wanting to start withdrawing their Pru pensions, and being faced with a 3% financial advice charge and only limited options. Plus poor customer service.
You may want to consider transferring the pension out to another provider. Normally you would still get the final bonus included in any transfer, unless a MVR is in place, which you would have been informed about if there was.
If you transfer it, then you would need to decide how to invest it in the new pension. It is unlikely they will offer a with profits fund as they are seen as somewhat old fashioned nowadays.