PruFund pricing error correction support

Below you’ll find the information to support you when having conversations with any client who has been affected by the PruFund pricing error.

Remediation update

Listen to this short update on the remediation process that reminds you about the error and how it happened.

Redress methodology

Watch this short video that covers how we identified which clients were impacted and how.

PruFund Growth (Dollar)

PruFund Planet 3

PruFund Cautious (Euro)

PruFund Planet 4

PruFund Cautious (Dollar)*

PruFund Planet 5

PruFund Growth Series C

PIA PruFund Planet 1

PruFund Cautious Series C

PIA PruFund Planet 2

PruFund Risk Managed 1 Series C

PIA PruFund Planet 3

PruFund Risk Managed 2 Series C

PIA PruFund Planet 4

PruFund Growth Series E

PIA PruFund Planet 5

PruFund Cautious Series E

PruFund Planet 1 Series F

PruFund Risk Managed 1 Series E

PruFund Planet 2 Series F

PruFund Risk Managed 2 Series E

PruFund Planet 3 Series F

PruFund Planet 1

PruFund Planet 4 Series F

PruFund Planet 2

PruFund Planet 5 Series F

Expected Growth Rate (EGR) is the amount by which the smoothed price of PruFund will increase on a day-to-day basis. It is forward looking and reviewed quarterly. Unit Price Adjustments (UPAs) are the backward-looking mechanism by which the smoothed price can be adjusted to reflect the actual returns of the underlying investments.

All questions and answers are updated as at December 2023.

Question Answer
What is the next stage in the remediation process? From the week starting 4th December we are remediating accounts where it is necessary to add a cash amount instead of units. This will normally be when either during the period of the error there was a full crystallisation of a client’s savings account, or alternatively there are no units left in the fund for which the error occurred. For these cases, we’ve calculated the amount due because of the incorrect price and revalued this up to the remediation date. For larger sums you may wish to discuss investment of this amount with your client. We will provide you with details of these clients in writing the week commencing 11th December.
Will you be writing to my clients in this situation? We will be writing to the clients in these situations, giving details of the amounts paid to their account. This will take place in February 2024. We will send you details of the clients and the amounts involved the week commencing 11th December. An example of the letter is shown below.
My client has had a unit alteration but no cash payment – why is this? There are a small number of clients where it was necessary to defer the unit correction to this stage of the remediation exercise. These will be detailed to you when we write to you the week commencing 11th December and we can provide further information upon request.
What about clients previously in Retirement Account who have transferred away? Under Retirement Account, where a client has transferred away, we will normally make an additional transfer payment to the new scheme. Remediation for these clients will start early in 2024.
Will you be writing to my clients in this situation? We do not plan to write to clients as it is likely their existing scheme will inform them of the additional amount received. We will however provide details to you of the amounts involved.
What about when payments need to be made directly to the client, for example if they have taken all the benefits from their plan previously? In this situation we will normally make a cash payment. We’ve calculated the amount due because of the incorrect price and revalued this up to the remediation date. These payments will be subject to a ‘de minimus’ of £25. This means that if the actual value is lower than £25, we will pay £25 regardless.
Will you be writing to my clients in this situation? Yes, we will be writing to clients in advance, and letting them know of the sum due. We will also ask these clients if they have changed their bank accounts four weeks before payment is made. Ahead of this mailing you will receive details of the amounts.
When will the remediation take place? The first stage of the remediation strategy has been agreed and will commence the week starting 17 July 2023. Due to the complexity of the remediation this will take several weeks to finalise. We will advise you how each of your clients are affected separately.
How is the remediation taking place?

Remediation will normally take place via a correction to the number of units a client has in their account(s). Remediating in this way will automatically correct their policy value to at least the level it would have been had the error not occurred.

Under Retirement Account, where a client has transferred away we will normally make an additional transfer payment to the new scheme.

In some circumstances it may be necessary to pay remediation directly to the client 

Will adding units into a pension be deemed a contribution or create an unauthorised payment? No, it is correcting an error.
Will you also write to clients direct? After further consideration and additional feedback from advisers we believe it is appropriate to write to all negatively affected clients where a unit correction has been made. You will have received details of all your affected clients before this took place. The letter wordings for the different scenarios can be accessed below, and have now been sent to the clients.
When will the adviser fee position be corrected? Once we have worked through the client remediation, we will ensure that your fee position is also corrected. We will analyse all your clients ongoing fees in total to determine if a payment is due. We will not ask for the return of any funds in the event of an overpayment. Any additional payment will not come from the client’s account.
Why might there be units cancelled in my clients’ Retirement Account policies in some cases? In some circumstances we may need to deduct units from an Income Account (a ‘D’ account) and add units to a savings account (an ‘A’ account). Even in this scenario no client will be worse off, and we will also ensure there is no detriment in terms of PCLS entitlement.
How will the units that are added be referred to on client statements? Units that have been added as part of this process will appear on client statements as “Inv Adjustment”.
How are you ensuring that this type of error doesn’t happen again? We have conducted an internal review of procedures, and had an external party review the whole process to ensure it is as futureproofed as it can be.
Where in the T&Cs does it allow us to make unit price adjustments of this nature? The correction has been made to bring the price in line with the UPA strategy set out in the T&Cs, and so by definition we are following the T&Cs. We are remediating separately clients who have suffered a financial detriment as a result of this error.
Can we see the changes to the unsmoothed prices We don't publish the unsmoothed price. This avoids speculation over possible smoothed price adjustments and helps protect investors in the PruFund funds.
Was the error an incorrect aggregation of the value of the mandates underpinning the PruFund range or was it an incorrect interpolation of the pricing feeds of the mandates? Neither. It was nothing systemic and was limited to a single pricing error. The error occurred as a result of a clerical error when recording the purchase of a particular investment. The error was initially small but, when combined with other reductions in investment values, was sufficient to result in Unit Price Adjustments (UPAs) being incorrectly applied in September or applied at an incorrect level. This also had a subsequent impact on the UPAs in October, as subsequent adjustments were more or less than they would have been had the September adjustments not taken place. The corrective action we are taking is to put customers who have been detrimentally impacted back in the position they would have been had the original error not occurred. Any customer who has gained through this error will retain this benefit. 
What was the error? In September we completed a number of downward UPAs but the size of the adjustments were incorrect due to a clerical error. This then meant that in some instances it affected the UPA in October also. In two instances this error caused a UPA to occur which should otherwise not have happened.
How did the error happen? This error happened as a result of a clerical error which triggered the UPA in September and in some instances affected the UPA in October also. 
When did you know about this error and why wasn’t it corrected sooner? We identified this error ourselves in October and corrected the unsmoothed prices at this point. However, we needed more time to determine the right adjustments to apply before we analysed the client position to ensure we captured all affected clients. 
When did the adjustments take place? Funds were adjusted on the 25 November, and the impact of the adjustments would have been visible from thereafter. 
Why aren’t all versions of PruFund impacted? Once identified, the error was resolved quickly in the unsmoothed price. Only funds which had UPAs in September required a further adjustment to the smoothed price.
Why wasn’t the error corrected at the October investment date? All UPAs that occurred in October were calculated using the correct unsmoothed price. However, to ensure any corrections were given the appropriate consideration it was necessary to leave any adjustments to the November investment date. 
Why couldn’t you just wait and correct the error when the next UPA is applied?

It was important to correct the error as soon as possible to avoid potential issues where investors are entering or exiting the fund at an incorrect price. UPAs are also formulaic and non-discretionary and this requires a special adjustment separate from the normal smoothing process.

Were the UPAs in September incorrectly applied? The UPAs were primarily driven by the underlying performance of the funds in line with our standard smoothing mechanism but, had the error not been present, the size of the UPA applied would have been different.
Why are correction figures different for each version of PruFund? The error related to a specific asset class and each version of PruFund will hold this in varying allocations which will affect end calculations.
How will you correct the client positions and will my clients be worse off? We will review any losses and gains made and we'll make sure that no client is worse off as a result of this error. We will ensure any net gains are honoured, any net losses will be amended.
What about the position for clients who have taken withdrawals or encashments from impacted funds? All clients will be put back in the position they would have been in if the error had not occurred. Full details of how this will impact those who have recently taken withdrawals will be provided when available.
How will I know if I my adviser fees have been affected? We are also identifying any advisers that may have been affected by this and completing calculations to understand the impact. If you have been affected, we will contact you to let you know. 
How will you correct my position?  We will review any losses and gains made and will ensure any net gains are honoured, and net losses will be amended.
Have you stopped any further impact for my clients or me? We have corrected the underlying issue and so there will be no further impact on any payments in or out of the fund, or any switches into another fund.
What’s the impact on affected funds?

Most have benefited from a nominal upwards adjustment. However, the Risk Managed 1 Fund for Series C (IPB) has had an increase of 1.07%, and the RM1 for Series E (RA) has increased by 1.07%.

Only two funds have had downward adjustments; The PruFund Growth Fund Series C (IPB) has had a reduction of 1.16% and the PF Growth Series E (RA) has also reduced by 1.16%.

Why is the positive correction for Risk Managed 1 higher than other funds? For these funds a UPA applied in September and October. Had the error not occurred there would not have been a UPA in September. This means the adjustment required is an uplift of 1.07%.
How do we know this hasn’t happened across more funds? We have reviewed our funds and we are confident this is an isolated incident. We will however take any learnings from this and apply across all our funds to ensure long term strength of processing. 
Are your IT systems adequate to manage this fund? The error is not related to an IT failure; however, our review of controls and processes will be holistic. 
Has the fund got too big for you to manage? No. From an investment perspective, the main life fund / PruFund has proven itself to be extremely scalable – it now has well over £100bn in assets, which simply wouldn’t have been possible had the range not been scalable. The size of PruFund allows us to access a breadth of asset classes, which are simply not available to other funds. This means that PruFund offers particularly good levels of diversification. This is particularly true for our real asset portfolio. Taking for example some of the global infrastructure/international real estate holdings, the average lot size is much larger, and smaller funds either don’t have the same access due to size, or are forced to take an extremely concentrated position. There are also ample liquid assets within the main with profit fund to enable it to remain flexible to change as capital markets evolve. The combination of dynamic asset allocation and access to niche real assets has greatly benefited customers vs competitor funds historically, and we hope it would continue to do so in the longer term.

Will this be reviewed independently to ensure everything has been done correctly?

We are conducting a review of controls and the process and will then review next steps when this has been completed.

Has the FCA been notified?

Yes, we have informed them and will provide updates to them.
To what extent does the entire WP fund engage in derivative strategies? The WP fund makes use of derivatives for risk management purposes only, primarily to hedge foreign currency risk on holdings of international securities. However, the issue was a clerical error unrelated to the fund’s use of derivatives.
Why is there a negative correction for PruFund Growth, when all other versions are receiving positive corrections?  For PruFund Growth Series C and Series E, a UPA was applied incorrectly in September. Had the error not occurred, there would not have been a UPA in September, but there would have been a downward UPA in October. Given underlying performance of the funds predominantly caused by the significant shift in some asset values globally, this October UPA would have been more negative than the one applied in September. Therefore, in these cases, smoothed prices were higher than they should have been, so a downwards adjustment was required.
Does the adjustment have anything to do with the recent issue around LDI strategies impacting the liabilities held within the with-profits fund?

There is no connection at all. The with-profits fund does not use LDI strategies. The issue was the result of a clerical error, not due to the performance or nature of assets managed by the fund.


My clients contacted me when they saw the change in values on MyPru. When was this made and why was it ahead of normal time.


The unit price adjustments caused by the error were made on 25th November. This needed to be earlier than the UPAs under the normal smoothing mechanism were applied to ensure that the correct price was used.