Buy an annuity

This is the Investment Pathway if you plan to use your money to buy a guaranteed income for life (also known as an annuity) within the next 5 years.

The fund selected

The fund selected to match this Investment Pathway is M&G Corporate Bond fund.

Why we’ve selected this fund

If you plan to use your money to buy a guaranteed income for life (also known as an annuity) within the next 5 years, the income you can get, will depend on a number of factors, such as age, health and interest rates.

We’ve selected a fund that aims to provide an investment to limit the impact of interest rates on the level of income you could get, when you choose to buy a guaranteed income for life. The value of your investment can go down as well as up so you might not get back the amount you put in.

Helpful information on investing and Corporate Bonds

Before we get started it’s important to remember some general information on the basics of investing.

If you invest your money it gives it a chance to grow over the longer term, which can help protect against the impact of inflation.

Inflation is the rising cost of goods you buy. If inflation is increasing, it means you can buy less with your money. So, if your money is earning little to no interest and inflation is rising, you’re effectively losing money in real terms.

If you have money in a bank account, there's a chance you could be losing money because of inflation.

Types of investment

There are different types of investment (known as ‘asset classes’). The four main investment types are:

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

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

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

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

Each of these four asset classes offers different levels of risk and potential rewards. The chart below shows the risk and reward levels for each of these asset classes.

The risk and reward levels are shown in the diagram below.

The risk and potential rewards of different asset classes

The fund selected to match your Pathway is a Bond. As you can see, Bonds have a higher risk and reward than cash but have a lower risk and reward than property and shares.

People have different needs when it comes to their investments. For example, this investment has been selected if you had told us you want to use the money to buy a guaranteed income for life (also known an annuity) in the next five years, so an investment with a lower risk may be more suitable. Whereas some people may not want to touch the money for a much longer period and may be willing and able to take more of a risk.

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 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 reward funds are likely to be more volatile, so will be invested in areas that are more likely to fluctuate in value.

As you can see, the levels of risk and reward are linked to how volatile a fund is. Bonds are not as volatile as shares and property, however, there is always a risk that a company could go out of business or a Government could default on a bond.

Other companies may use different descriptions and ratings.

A closer look at Corporate Bonds

The fund selected for your Pathway invests in Corporate Bonds. Corporate bonds are debts repaid at a fixed interest rate over a set period of time. This is why they are also sometimes referred to as ‘fixed-interest’ investments.

Companies may issue bonds when they need funds to finance new business opportunities. It’s not so different to borrowing money for a car or a mortgage and repaying it on a predictable schedule.

When we invest in bonds and a company repays debt, the repayment (minus costs and charges) is returned to investors. The benefit of investing in corporate bonds is that they have the potential to provide a steady income and are generally less likely than shares and property to rise and fall rapidly over a short period of time.

M&G Corporate Bond fund

If you choose this Pathway your money will be invested in M&G Corporate Bond fund.

The objective of the fund

All funds have an objective set out by the fund manager. The objective of this fund is –

The Fund aims to provide a higher total return (the combination of capital growth and income), net of the Ongoing Charge Figure, than the average return of the Investment Association Sterling Corporate Bond Sector over any five-year period.

What this means

The M&G Corporate Bond fund aims to offer you a higher return than the average return of this asset class (i.e. corporate bonds), over any five year period.

Where is M&G Corporate Bond fund invested

The M&G Corporate Bond Fund invests primarily in UK and International Bonds. The splits of these assets determines the risk level of the fund and therefore the potential for reward.

On a scale of 1-6 this fund has a risk rating of 2 meaning it has a medium to low risk.

This shows the asset mix for M&G Corporate Bond fund as at 31 August 2021.

The asset mix is regularly reviewed and may vary from time to time, but will always be consistent with the fund objective.

Fund costs and charges

In this table you can see the percentage invested along with the costs and charges. The yearly total is made up of the yearly charge and further costs. The yearly total is on top of the Product Charge and any Adviser Charges you already pay. Costs and charges are subject to change.

The full details of all these costs and charges are in your illustration.

Fund name

% of Investment in selected fund

Yearly Charge

Further costs

Yearly total

M&G Corporate Bond

100%

0.31%

0.00%

0.31%

Changing your investment

If you’re already in PruFund it usually takes 28 days to move your money out of PruFund into the new fund.

What to do next

If you have decided an Investment Pathway is right for you, there are two ways to go ahead. You can call our Customer Service Executives on 0345 268 0488Monday to Friday 8.30 – 6pm. They can’t tell you which option to go for, or give you advice but they can give you information to help you make a decision.

Or, you can use our Online Service. To register or login, simply go to our website pru.co.uk/pension.  

If you go ahead without advice, you’ll be taking responsibility for your choices and your own decision. This means the Financial Ombudsman Service(FOS) doesn’t give you the same protection for the decision you make, but you can still refer any matter to them if you feel you haven’t been treated fairly. The FOS is an independent official body, established by Parliament, for settling disputes between UK-based financial companies and their customers. You can find out more at www.financial-ombudsman.org.uk/.

We recommend you get advice or guidance

We know there’s a lot to consider when you’re investing money, and it can be tricky to know where to start. To help you understand all your options, we recommend speaking to your adviser or getting guidance.

Getting advice

We always recommend speaking to your adviser when making decisions about the money in your Retirement Account. Your adviser is best placed to look at your individual circumstances and recommend what is right for you. If you don’t have an adviser, you can find one at unbiased.co.uk.

Getting guidance

Pension Wise is a free and impartial government service from MoneyHelper. They won’t make recommendations or tell you how to invest your money, but will provide information on a range of available pension options. You can arrange an appointment to speak to a pension specialist by calling 0800 280 8880 or visiting pensionwise.gov.uk

Be sure to shop around

The drawdown and Investment Pathway options you get from your pension provider might not be the best for you. It’s always worth comparing what you can get from other providers too, because you might be able to get a better deal.

MoneyHelper offers free and impartial guidance services, set up by the government, to help you understand and improve your finances. They can provide helpful information on how to shop around for Pathway options offered by other companies. You can also use their drawdown comparison tool to see what different providers offer. You can find out more on their website  "http://www.moneyhelper.org.uk"

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 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).

Pathway 4

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