London 26 February 2020 – M&G plc
1 today announced that the £88billion With-Profits Fund
2 (the Fund) of the Prudential Assurance Company, a wholly-owned subsidiary, returned 11.5% over the 12 months to the end of 2019. On the basis of that performance, coupled with the financial strength of the overall fund built up over many decades, more than two million savers are set to benefit from an expected £2billion bonus.
This £2billion is made up of the annual with-profits bonus declaration, plus an extra distribution to eligible customers. (For full details of the 2020 With-Profits Bonus Declaration, please visit our website
https://www.pru.co.uk/existing-customers/bonus-declaration).
Another decade of strong performance
In the ten years to the end of 2019, the Fund produced a cumulative gross return of 115.5% before tax and charges. This compares with a 104.0% return from the FTSE 100 Index
3 over the same period, not allowing for any management fees.
What this means for different types of with-profits customers
• A single premium of £10,000 invested in PAC With-Profits Bond (Flexible Investment Plan) in 2009 will be worth £17,250 in 2020, representing an annualised return of 5.6%.
• A PAC personal pension customer who has contributed £200 (gross) a month for 10 years (£24,000 in total) and is retiring on 1 May 2020 will have a fund value of £31,267
What is the With-Profits Fund?
The overall fund aims to offer customers returns that balance the extreme highs and lows of short-term investment performance, through investing in a global portfolio of mixed assets and applying ‘smoothing’ to pay-outs from year-to-year.
What is smoothing?
Smoothing some of the extreme highs and lows of short-term investment performance provides a more stable return. This is done by holding back some of the investment returns in good years with the aim of using this to support bonus rates in the years where the investment returns are lower.
Smoothing offers some protection against bad market conditions. It will not stop the value of a savings plan reducing if investment returns have been low.