Important update on changes to Prudential's onshore investment range

Since its launch in 2004 PruFund has been a huge success. Popular with both advisers and customers we have attracted over £1bn of investment into the current series. Offering a unique smoothing formula that helps to iron out the daily ups and downs of the markets, the option of an investment guarantee and delivery of attractive returns has given investors peace of mind in these turbulent times.

Currently we offer the PruFund Growth series across onshore bonds, offshore bonds and pensions. PruFund Growth is available in two versions on these products - one with and one without a five year rolling investment guarantee. The asset mix of the funds is approximately 40% fixed interest/cash and 60% equities/property.

There is also a stand-alone onshore bond - PruFund Investment Plan - that only has access to PruFund Growth and a PruFund Growth & Income variant.

NEW PruFund Cautious Funds

In response to increasing demands for more cautious investment solutions we are delighted to announce that we are extending the concept of PruFund by launching a further series to sit alongside the existing one. This new range - The PruFund Cautious funds - will use the same unique smoothing approach and be available with or without an investment guarantee. To appeal to more cautious investors the funds will have an asset mix of approximately 70% fixed interest/cash and 30% equities/property. This gives advisers and investors a wider choice of PruFund solutions to help meet specific needs.

The Protected version of the new series has a 5th Year Anniversary investment guarantee at a cost of 0.75% p.a. This is not a rolling five year guarantee. The annual management charges for the funds are the same as those for the existing series and are determined by the product selected.

To demonstrate our commitment we are also offering an introductory discount of 0.25% p.a. on the cost of the guarantee for new customers investing in FIP. This reduces the cost of the guarantee to just 0.50% p.a. for the five years of the guarantee period and is available from the launch date of 13th July to the end of 2009.

We are conscious that advisers will want time to understand the new series and how it can best be used with their clients. We are therefore phasing the delivery of the new series product-by-product during the second half of 2009.

Changes to our onshore investment range

As you will be aware from recent announcements in the press, the ability to provide attractively priced investment guarantees on funds that are largely invested in equities is becoming increasingly difficult. So, at the same time as launching the new PruFund Cautious series we will be phasing out access to the guaranteed versions of the existing series. This does not affect existing customers in any way.

The first products we are changing are onshore bonds. The key changes are:

• The two new PruFund Cautious Funds (one with and one without an investment guarantee) will be available for investment through our Flexible Investment Plan (FIP) from Monday 13th July
• The Expected Growth Rate on these new funds is 6.1%
• The AMCs for these funds will be 1.45% p.a. for the Initial Charge Option and 1.75% p.a. for the No Initial Charge Option
• The existing PruFund Protected Growth fund (i.e. the version with the five year rolling investment guarantee) will not be available in both our Flexible Investment Plan and Prudential Investment Plan (our factory gate priced bond) from Friday 10th July
• The existing PruFund Growth fund (i.e. the version without an investment guarantee) will remain available under both FIP and PIP
• Because investors and advisers are increasingly looking for access to a wide range of funds within bonds, our stand alone PruFund Investment Plan will be closed to new business from Friday 10th July. As mentioned above, this product only had access to the PruFund Growth and PruFund Growth & Income funds - it had no access to other funds
• Given that advice will have been given to customers before this announcement, we are offering generous transitional arrangements. We will allow investments into the existing PruFund Protected Growth fund via FIP and PIP, and into PruFund Investment Plan up to 31st July. To qualify, all paperwork must be submitted to Prudential by that date.

The introduction of the new series now means that advisers have a choice to offer their clients within our FIP bond. Both offer the unique smoothing approach of PruFund. The Growth version is ideal for those looking for exposure to the equity markets without experiencing the daily fluctuations. The new version has a greater exposure to fixed interest assets and should provide a less volatile return for the more cautious investor. In addition, if an investor is looking for the security of an investment guarantee, this is available through the protected version of the new Cautious series. For a limited period we are offering a discount on the cost of this guarantee.

By the end of 2009, we aim to have completed similar changes across all our core products - offshore bonds, pensions, drawdown and Trustee Investment Plan. At this stage, there are no changes being made to these products. This means that they continue to offer access to the existing PruFund Growth series including a version with a guarantee.

Now, more than ever, customers are looking for cost effective guarantees. We are committed to meeting these needs and want to ensure customers have access to them at all times. By adopting this phased approach over the next few months, an investment guarantee will be available in all our core products without a break. We will also look for further ways of using the PruFund concept to help provide advisers and customers with innovative and attractive investment solutions. We will continue to monitor investment conditions and review our position accordingly. We reserve the right to review the special offer of the guarantee at any time.

Summary of availability for onshore bonds:

View the Transitional Arrangements

For further information please contact your Prudential Account Manager.