With Profits Bond

The Prudential with profits fund is only one of two that i still feel happy using.

As with most bad press, there are some truths and some myths. The product relies heavily on the financial strength of the company. When the financial strength is weak, the with profits fund is hit. Prudential and Norwich Union are the two companies that have the strength to maintain decent with profits funds.

I have done quite a few Pru WP bonds over the last 18 months and all of them are very healthy. The 12 month statements just gone out are showing 5.1% net return. When you add in the 104% allocation that you will be getting from your IFA, that makes a first year return of 9.1% which is very nice.

Pru have a annual withdrawal allowance and after 5 years, you can draw out £25,000 a year with no concerns of a market value reduction.

The Norwich Union WP bond is slightly lower risk as they have a capital guarantee on 10th anniversary. You can withdraw your full investment on year 10 and have no market value reduction applied regardless of the state of the fund. If purchased before christmas they have an offer that the guarantee applies on the 5th anniversary as well (although that may be a limited offer not available to all IFAs).

Norwich Union is likely to perfrom a little lower than Pru but if you want more guarantees that is the price you pay.

Pru have just launched the Prufund which is an alternative smoothed return product to the with profits fund and with a different charging structure. It is unlikely to return much different to the Pru WP fund at the end of the day as the current rate of return is identical. However, the small differences may appeal to you (or not).

As long as you stick with Pru and NU, you should be fine with WP. I wouldnt go with anyone else (L&G have the financial strength to handle WP but they dont seem very committed to it so i wouldnt place any new business with their WP fund).

I made an ommission on my post which should have been there and would make more sense on my comment about the NU bond being slightly lower risk and offering more guarantees. That is that the £25,000 MVA allowance by Pru is not a contractural agreement. Pru can alter that at a later date if they desire.

So, it's more of a promise subject to conditions at the time. This is not an issue with the newer prufund version.

Thanks DD

In your original reply you said we would get an allocation of 104% - our IFA said it would be 102.5% plus a percentage of their initial commission.  

Does this equate to the same thing?

Lolly

Yes it is the same thing.   I guess he isnt as generous as me.    :P ::)   Although to be fair, it depends on the amount being invested.  Pru give an increasing amount of allocation the more you invest.  If you then include a bit of commission gifting, it then brings it up. Last Pru one i did got 106% on 100k invested.

If you've decided on Prudential, why go through an IFA? Go through a broker and you can get nearly all the commission rebated. I use Chartwell Direct. On our Prudential WPBs, they rebated between 5 - 6% of the investment back.

No protection against bad advice should it all go tits up would be one reason.