London 24 February 2022 – M&G plc today announced that the £93.7 billion With-Profits Fund1 (the Fund) of the Prudential Assurance Company, a wholly-owned subsidiary, returned 12.0% over the 12 months to the end of 2021. 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 £3 billion bonus.
This £3 billion is made up of the annual with-profits bonus declaration, plus an extra distribution to eligible customers. (For full details of the 2022 With-Profits Bonus Declaration, please visit our website https://www.pru.co.uk/existing-customers/bonus-declaration).
A decade of strong performance
In the ten years to the end of 2021, the Fund produced a cumulative gross return of 113.3% before tax and charges. This compares with a 94.0% return from the FTSE 100 Index2 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 2011 will be worth £17,248 in 2022, 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 2022 will have a fund value of £33,233.
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.
What the Fund is invested in – the asset mix as at 31 December 2021
| Asset |
% |
| UK Equities (listed) |
18.8 |
| Overseas Equities (listed) |
29.4 |
| Property |
13.9 |
| Alternative Assets |
10.3 |
| Corporate Bonds |
22.5 |
| Cash & Receivables |
5.1 |
| Total |
100 |
Clare Bousfield, Managing Director of Retail and Savings at M&G plc, said: “Prudential With-Profits investments continue to be an attractive option for investors who want strong returns over the longer-term.
“Our With-Profits customers have benefited from the solid performance and double-digit growth delivered by our globally-diversified With-Profits Fund over the last 12 months, which together with an extra distribution of £1.5 billion to eligible policyholders, is reflected in year-on-year increases in their policy values.
“As we pivot to sustainability, our With-Profits Fund is investing up to £5 billion into privately-owned enterprises working to create a more sustainable world. This, alongside the launch of our PruFund Planet range of funds last year, shows some of the ways we’re meeting increasing customer demand to help them to manage and grow their savings so they can live the life they want, while making the world a little better along the way.”