With the introduction of the MiFID II and KIDS regulations, we have improved the clarity and transparency of our communications to our customers. These changes include the information we show customers on charges and expenses in our illustrations on all products offering our PruFund Funds and Unitised With-Profits Fund.
The PruFund Funds and our Unitised With-Profits (UWP) Fund, all of which incur additional investment expenses that will vary from year to year.
All individual products which offer our PruFund Funds and / or the Unitised With-Profits Fund listed below
|Product Type||Product Name||Funds Offered|
|Pensions||Prudential Retirement Account||PruFund Funds|
|Flexible Retirement Plan||PruFund Funds & UWP|
|Trustee Investment Plan||PruFund Funds & UWP|
|Individual Savings Accounts||Prudential ISA||PruFund Funds|
|Onshore Bonds||Prudential Investment Plan||PruFund Funds & UWP|
|PruFund Investment Plan||PruFund Funds|
|Offshore Bonds||Prudential International Investment Bond||PruFund Funds & UWP|
In addition all products open to top ups which offer the PruFund Funds and / or the Unitised With-Profits Fund are affected.
The illustration figures have changed to show the combination of the AMC and the current additional investment expenses, as a result:
The projected values are lower than before, taking into account the additional investment expenses and Reduction in Yield.
The Reduction in Yield (RIY) is higher, taking into account the additional investment expenses.
The growth rates in our illustrations have not changed. It is a regulatory requirement that the growth rates quoted in our illustrations must use a mid-growth rate that accurately reflects the investment potential of the underlying investment, subject to a maximum of 5% for Pension and ISA products or 4.5% for other products.
Note that for the products listed below it will look as if the AMC is higher as the additional investment expenses will be included in the AMC figure:
Retirement Account illustrations and the generic illustrations published for the Prudential ISA will detail the additional investment expenses separately.
We will be updating our systems to make the two parts clear in future.
The updates were made between 22 December and 2 January 2018, meaning all illustrations now produced are on the new basis. Dates for each product are detailed in the table below:
|Product Name||Date Changed|
|Prudential Retirement Account||2 January 2018|
|Flexible Retirement Plan||22 December 2017|
|Trustee Investment Plan||22 December 2017|
|Prudential Investment Plan||22 December 2017|
|PruFund Investment Plan||22 December 2017|
|Prudential International Investment Bond||22 December 2017|
* We do not produce personalised illustrations for the Prudential ISA. The published example illustrations will be updated in early 2018. The Prudential ISA is provided by Link Financial Investments Limited.
We are not making any change to how we operate PruFund. The smoothed price for PruFund will continue to take account of the additional investment expenses as part of the investment return. Our EGRs are also unaffected - our expectations have always taken account of the additional investment expenses.
The expenses vary by fund between 0.05% and 0.19% due to the differing asset allocation of the funds. The charges are variable and could change in future.
An example of the type of expenses being disclosed are property maintenance, renovation and property operational and servicing costs.
This is because it's a requirement of the disclosure regulations that we reflect these expenses in the projected values and RIY, There is no change to the overall returns customers have and will continue to receive as a result of these expenses not having been disclosed in our illustrations and literature. These expenses have always been included in our EGR calculations and the returns declared from our Unitised With-Profits Fund.
The Retirement Modeller and FRP Modeller were updated on 29 December 2017 to be consistent with the illustrations.
Updates were made to Defaqto, Selectapension and Synaptics on 2 January 2018.
TVAS was updated for both Flexible Retirement Plan and Prudential Retirement Account on 2 January 2018.
Yes we will be doing that in 2018. We will let you know how and when this is planned to happen. System changes are being implemented now to ensure we are ready for the MiFID II and KIDs regulation coming into force from the beginning of 2018.
We moved to the updated illustrations for all products on 2 January 2018. This means that some customers may get a post-sale illustration that is different to their pre-sale (2017) illustration.
We can provide a new business illustration on the new basis, or an illustration for an in force policy on the new basis. For Retirement Account you can run a new illustration online.