The funds selected for Pathway 2 are:
Prudential M&G Corporate Bond Fund (68%)
Prudential M&G Gilt & Fixed Interest Income Fund (22%)
Prudential International Fund (10%)
Please note that these funds are only available to you if you select Pathway 2, they are not available for direct investment through your Pension Choices Plan.
Why we’ve selected these funds
If you choose Pathway 2 it means you plan to use your money to buy a guaranteed income for life (also known as an annuity) within the next 5 years. We’ve selected a basket of funds that aims to maintain the buying power of your money. This is important because when you come to buy your annuity, the level of income you could get will depend on a number of things including the value of your pension pot at that time.
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 2 has a risk rating of 3.
Other companies may use different descriptions and ratings.
For further information about risk and reward please see the Pension Choices Plan Fund Guide.
Where these funds are invested
In Pathway 2 you will be invested 90% in corporate and government bonds, with 10% investment in international equities, across the three underlying funds. The split of these assets 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 will automatically adjust the amount invested in your funds each month to bring them back in line with the target percentages for the pathway.
More information on where Pathway 2 funds are invested
A closer look at corporate & government bonds
All bonds are really an 'I owe you' that promises to pay an amount of money on a specified date and pay a fixed rate of interest along the way. Companies and governments can issue bonds, when they want to raise money. Bonds issued by companies are called corporate bonds. Bonds issued by the UK government are called gilts and those issued by the US government are called treasury bonds.
A closer look at international equities
Equities are also known as shares or stocks. They are a share of the ownership of a company. Shares have two potential benefits. Firstly, the share price moves as the value of the company changes. Also regular payments, called dividends, may be made to the owners of the share. These are based on how well the company is doing (remember, they can go down as well as up in value). International equities will be invested in companies based all over the world but focused on the larger economies.
Find out more about the Pathway 2 funds
If you would like to know more about the funds that make up Pathway 2, please take a look at the fund factsheets:
Prudential M&G Corporate Bond Fund (68%)
Prudential M&G Gilt & Fixed Interest Income Fund (22%)
Prudential International Fund (10%)
What fund charges and further costs are there for Pathway 2?
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 funds in Pathway 2 by the deduction each day of 1/365th of the applicable Annual Management Charge, from each fund.
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 details of fund charges and further costs for Pathway 2; note that further costs are indicative and are correct as at 25 August 2023.
Pathway 2 |
Fund names |
Annual Management Charge |
Further costs |
Fund size discount |
Maximum yearly total |
I plan to use my money to set up a guaranteed income (annuity) within the next 5 years |
Prudential M&G Corporate Bond Fund (68%) Prudential M&G Gilt & Fixed Interest Income Fund (22%) Prudential International Fund (10%) |
1.00% |
0.00% |
0.30% |
0.70% |
Fund charges and further costs may vary in future and they may be higher than they are now.
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 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).
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"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at 5 Central Way, Kildean Business Park, Stirling, FK8 1FT. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company Limited. The Prudential Assurance Company Limited and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc which is a holding company registered in England and Wales with registered number 11444019 and registered office at 10 Fenchurch Avenue, London EC3M 5AG, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.