Pathway 4

‘This is the Investment Pathway if you plan to take out all your money within the next 5 years

The funds selected for Pathway 4 are:

Prudential Cash fund (67%)

Prudential PruFund Risk Managed 1 fund (33%)

Why we’ve selected these funds

If you choose Pathway 4 it means you plan to take out all your money in the next 5 years. As you’re not investing for the longer term the majority of your money will be invested in a cash fund. Investing in a cash fund is safer than, for example, investing all your money in the stock market. The rest of your money will be invested in a fund which aims to provide some investment growth.

Investing in this combination of funds means that the value of your pension fund is unlikely to rise or fall significantly - an important factor when planning to withdraw your money. The aim is to provide returns that keep up with inflation and maintaining the value of your money is the primary objective.

The value of your investment can go down as well as up so you might not get back the amount you put in.

Risk and reward

In order to understand the relationship between risk and reward it’s helpful to first understand the different types of investment (known as ‘asset classes’).

The four main investment types are:

Shares (also known as ‘equities’) give investors a portion of ownership of a company.

Commercial property includes ownership of retail, office, and industrial property.

Bonds (also known as ‘fixed-interest’ investments) are loans companies or governments take when they need to raise money.

Cash refers to currency, deposit accounts (bank savings accounts), and other cash equivalents.

Each of the four asset classes offers a different level of risk and potential reward so the split of these assets determines the risk level of the fund and therefore the potential for reward.

To help you understand a fund’s level of risk and reward we give each fund a risk rating. Prudential’s risk ratings are between 1 and 6 (with 1 being a lower risk and 6 being a higher risk).

  • The lower risk and potential reward funds are likely to be less volatile, so will be invested in areas which are less likely to fluctuate in value.
  • The higher risk and potential reward funds are likely to be more volatile, so will be invested in areas that are more likely to fluctuate in value.

On a scale of 1-6, Pathway 4 has a risk rating of 2.
Other companies may use different descriptions and ratings.
For further information about risk and reward please see the Pension Choices Plan Fund Guide.

Pathway 4

Prudential Cash fund invests mainly in deposits and other money market instruments.

PruFund Risk Managed 1 invests in a wide range of assets by investing in our With-Profits fund. This means that your money is spread across different asset classes. Spreading your investment means poor performance in one asset type can be offset with good performance in another as you don't have all your eggs in one basket. This is known as multi-asset investing.

Here are the asset allocations for PruFund Risk Managed 1 as at 30 September 2021. Note that these are reviewed regularly and may vary from time to time but will always be consistent with the fund objective.

The split of assets across these two funds determines the overall risk level of the pathway and therefore the risk and potential reward.

Because some types of asset change value more than others, we’ll automatically adjust the amount invested in your funds each month to bring them back in line with the target percentages for the pathway.

How PruFund works

PruFund is what we refer to as a ‘smoothed’ fund. This means that it helps protect your money from some of the extreme short-term ups and downs of the markets and gives you a smoother return. We call this smoothing. It won’t protect you from the full impact of any extreme or sustained market changes, but it does aim to limit the impact of these. The value of your investment can go down as well as up, so you might not get back the amount you put in.

PruFund is invested in our With-Profits Fund, the largest of its kind in the UK. There may be times when we need to suspend smoothing for a period of consecutive days, or reset the smoothed price to the unsmoothed price on a particular day in order to protect our With-Profits Fund.

When you invest in PruFund your money is pooled together with other investors. This pool of money is then used to buy a large range of different types of asset classes, which helps to offset poor performance in one asset type with good performance in another. Pooling money also brings about other benefits like having access to a wide range of global funds that individual investors may not otherwise be able to access. And because there are many investors the costs are spread out too.

A key benefit of PruFund is that it’s actively managed by teams of investment experts. Our experts continually assess the data and performance to make ongoing decisions about where to invest (and where not to) and they look out for new opportunities. To achieve the right mix of assets at any given time, they also have a regular process of monitoring and adjusting the mix for any market or fund changes.

For the range of PruFund funds, what you receive will depend on the value of the underlying investments, the Expected Growth Rates as set by the Prudential Directors, our charges, the smoothing process, if there is a guarantee and when you take your money out.

Watch PruFund explained

We recommend watching this 4 minute video to help you understand some of the key aspects of PruFund in more detail.

Please refer to 'Your With-Profits Plan. – a guide to how we manage the fund (PruFund range of funds)' for more information.

More about Pathway 4 underlying funds

If you select Pathway 4 it means you’d like to take out all your money in the next 5 years. Your money will be invested in Prudential Cash fund (67%) and PruFund Risk Managed 1 fund (33%).

While cash or cash-like investments provide a safer home for your money in the short term, they typically grow at a lower rate than inflation. This means there’s a risk that inflation and/or charges will reduce the value of your fund over time. If you plan to invest over the longer term, you should continue to review that your investments still meet your objectives.

All funds have an objective set out by the fund manager.

Prudential Cash fund

The objective of this fund

Prudential Cash fund aims to provide a return consistent with investing in unsecured interest bearing deposits and/or reverse repurchase agreements and/or short-term UK Government bonds.

What this means

The aim of the Prudential Cash fund is to maintain capital and provide a return in line with money market interest rates, before charges. It also aims to provide a safer investment for some of your money than, for example, investing all your money in the stock market.

PruFund Risk Managed 1 fund

The objective of this fund

PruFund Risk Managed 1 aims to achieve long-term total returns (the combination of income and growth of capital). The fund is actively managed and aims to limit the fluctuations ('volatility') your investment experiences, after allowing for smoothing, to 9% per annum over the medium to long-term. There is no guarantee that the fund will achieve its objective of managing the volatility to the target level.

What this means

PruFund Risk Managed 1 aims to maximise your medium to long-term returns (5-10 years) with a low level of risk. It also offers you some protection from the extreme short-term ups and downs of the market by aiming to deliver smoothed returns. It won’t protect you from the full impact of any extreme or sustained market changes, but it does aim to limit the impact of these.

As we have seen from the fund objective, the volatility limit for PruFund Risk Managed 1 is 9%. This means the aim is to try to ensure the fund value doesn’t fluctuate by any more than 9%. If that does happen, as there is no guarantee it will always be within the limits, the fund manager will take action to try to bring it back within the guidelines.

The value of an investment can go down as well as up and the value in the future may be less than the amount invested. For the range of PruFund funds, what you receive will depend on the value of the underlying investments, the Expected Growth Rates as set by the Prudential Directors, our charges, the smoothing process, if there is a guarantee and when you take your money out.

What fund charges and further costs are there for Pathway 4?

We take an Annual Management Charge (AMC) for looking after your investment, from each of the funds you invest in. Any further costs shown are expenses which are borne by the fund. Together they add up to the yearly total (%). These are shown in the table below.

The funds are actively managed by expert Fund Managers who make the day to day investment decisions on behalf of investors. This active management of funds aims to achieve greater returns for investors than funds using less active management, and this can come with a higher cost.

We take the AMC for the PruFund funds by the monthly cancellation of units from each investment. We take the AMC for the Cash fund by the deduction each day of 1/365th of the Annual Management Charge.

All money you have invested in your Pension Choices Plan will benefit from an AMC discount of 0.30% regardless of how much your fund is worth. Please refer to the Key Features Document for more information.

Please see the table below for the current fund charges and further costs for Pathway 4:

Pathway 4

Fund name

Annual Management Charge

Further costs

Fund size discount

Maximum yearly total

I plan to take out all my money within the next 5 years

Prudential Cash fund (67%)

Prudential PruFund Risk Managed 1 fund (33%)

1.15%

0.05%

0.30%

0.90%

Note: There are two funds in Pathway 4 and each fund charges an individual AMC. The charge quoted to invest in the pathway is the combined charges of the two underlying funds based on the proportion they make up of the pathway. The proportions are rebalanced monthly to the original levels. In between times the split of investments and the charge being applied may marginally differ, based on fund performance.

For further details of charges please refer to the Pension Choices Plan Fund Guide.

What to do next

If you want to use Investment Pathways or have any questions, please call our customer service team on 0808 234 2372. They can’t tell you which option to choose, or give you financial advice, but they are here to help you.

Find out about the funds selected to match each pathway objective

Pathway 1

I have no plans to touch my money in the next 5 years.

Pathway 2

I plan to use my money to set up a guaranteed income for life (also known as 'an annuity') within the next 5 years.

Pathway 3

I plan to start taking my money as a long-term income within the next 5 years (also choose this option if you plan to take out some money, as and when you need it, within the next 5 years).