Despite the recent bad press surrounding with profits investments, Prudential allegedly plans to aggressively market their traditional with profits fund to investors this year.
Over the past few years with profits bonus rates have been consistently falling, mainly due to the pressures of falling World stock markets. In addition to bonus rates falling, insurance companies have been activating penalties known as market value adjustments for people cashing investments in.
The reason for these penalties is to stop more than the real value of the fund's underlying assets being cashed in. For example, if you had been allocated a bonus of 3% last year, it is unlikely that the return received on the fund was anywhere near 3%. This means that you have been given more in a year that actually returned less. This is the smoothing effect of a with profits fund and is designed to even out the peaks and troughs seen with stock market or equity investments.
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