Why has my Prudential with-profits pension value increased by 27.7%?

osborne1-0

Just received my Prudential with-profits pension valuation, with 1 year to go to my “Selected Retirement Date”.  The “Final Bonus” has increased by 27.7% (Feb ’22 to Feb ’23).  Is this normal for Prudential With-profit pensions to perform like this with 1 year to go?   In addition, what about the final year, has anybody received a similar increase in the final year?  There is a MVR of 1.1% for the first time since 2009.

The Prudential response was that markets go up and down.

This year, I was planning to transfer the pension out of the Prudential (started in 1989), to a Sipps that I hold.  However, should I wait until next years “final bonus”, bearing in mind this year’s percentage increase, before transferring?

Thanks for any thoughts

Gary1984

The “Final Bonus” has increased by 27.7%osborne1-0 said:

The “Final Bonus” has increased by 27.7% (Feb ’22 to Feb ’23). 

Just to be clear, would it be more appropriate to say that a final bonus of 27.7% has been declared rather than it has been increased? Presumably this is the first time you've been given a figure in relation to the TB?

Anyway I believe holding back awards like this until the terminal bonus is declared is fairly normal structuring. It reduces the risk to the company of declaring significant bonuses only for the underlying assets to fall in value and leaving them with a liability that they can't meet. By waiting until the policy matures they know exactly what those underlying assets are worth so can now safely award the appropriate bonus as a TB at no further risk to themselves.

osborne1-0

This is not the first time I have been given a figure in relation to the TB.  Pension started in 1989, but only in 2002, when the yearly statements layout changed, I could clearly see the Final Bonus, Plan Value and the Total Value.  All but 3 years (2008, 2009 & 2019), the final bonus has been increasing.  If Pru has been holding back the bonuses until now, will the next and final year be similar? 

I will not take the pension yet because of the MPAA rule, (other pension contributions are over the £4000).

What happens to the “with profits” pensions in terms of Final Bonus, Plan Value and the Total Value when you go past this date?

dunstonh

To get a like for like comparison, look at the transfer values on these old plans.    They always include the final bonus accrued to date.   So, if you compare the current transfer value with previous years transfer values, then you have a better idea of how it has done.

The final bonus is not included in the current values.  So, if you flit between current value and transfer value, you will have one with and one without final bonus.