25 February 2009
Prudential reduced annual bonuses in its with-profits fund
yesterday, with about one million pension policyholders facing
bonus falls of up to 9.3 per cent. The reduced annual bonus is in
response to tumbling stock, bond and property markets.
Prudential said that it was acting in the fund's best interests
and was cushioning policyholders against potentially bigger cuts. A
spokesman said that the cuts compared well against rivals and
against the sharp falls in the investment markets. The FTSE 100
share index lost more than a third of its value last year.
David Belsham, Prudential's chief actuary, said: "It is
important to remember that with-profits products are a medium to
long-term investment and our with-profits customers have received
strong annualised returns."
With-profits funds operate a process known as "smoothing",
whereby payments are capped in the good investment years and
limited in the bad to ensure that the fund maintains its overall
strength.
