The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Wednesday, February 23, 2005

Prudential's Little Ray of Sunshine

Prudential's Little Ray of Sunshine

Those of your with underperforming and useless endowment polices, will no doubt be dreading this year's round of letters from your life assurance companies; as they tell you, yet again, that they are cutting their bonuses on their pitifully pathetic products.

However, there is one small piece of good news for those of you with a Prudential with profits policy.

It is reported that bonuses paid to with-profits policy-holders will be the same or bigger than last year's.

Around 5.5M people hold a Prudential with-profits fund. Prudential said the fund had seen an "exceptionally strong" return of 13.4% gross over the past year, compared with the FTSE 100 index's total return of 11.25%. Over the past five years, the fund has seen a pre-tax return of 20.7%, while the FTSE 100 has seen a negative total return of 19.5%.

Prudential said that buoyant performance meant it would add £2.2bn to the value of its policies.

This means that Prudential will at least maintain the same level of bonus it paid last year across all with-profits policies. Additionally, its with-profits annuities total bonus was to be increased to 7.12% this year, up from 6.35% last year.

David Belsham, actuarial director at Prudential Assurance, said that the fund's good performance was down to "long-term prudence" quote:

"We are now seeing the benefit of long-term prudence. We took early action to protect policyholders' funds by switching out of equities ahead of the prolonged bear market and policyholders are now benefiting from the strong returns earned on Prudential's with-profits fund...This year's bonus declaration shows that with-profits continues to be an attractive investment for policyholders when provided by a financially strong and well managed fund, such as Prudential."

I have but two simple questions:

1 If the Pru can do this, why can't the other life assurance companies?

2 The implication of the Pru's prudence (forgive the pun), is that other life assurance companies have not been prudent. This surely means that they (the other life assurance companies that have cut bonuses) can be sued for mismanagement, doesn't it?

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