Following Prudential's recent announcement to impose a Market Value Reduction (or penalty) for people withdrawing money out of their With Profits Fund, more people could now be caught out.
When the penalties were first introduced, they only applied to investors withdrawing £25,000 and over. This has now been dropped to people withdrawing at least £10,000 from policies at least five years old. For policies that were taken out less than five years ago, the penalties are applied to any amount withdrawn.
The actual penalties imposed will depend on a number of factors including how much is being withdrawn and when the policy was originally taken out.
Therefore, if you are planning on withdrawing money, make sure you know how much your penalty will be.
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What is a 'with profits' policy?