With-profits funds explainedPrudential customers

£8.7 billion is at stake

Prudential has decided not to undertake a reattribution

Prudential’s inherited estate is currently valued at £8.7 billion. The company argues that this money is needed to ensure the financial strength and performance of the fund, but we are deeply concerned by how much money the company has taken from the inherited estate and used for purposes that are not in the interests of policyholders.

Broken rules and mis-selling

£1.6 billion has been taken to date from the inherited estate to cover compensation costs from when the company broke the rules and mis-sold policies. It has also taken additional money to pay shareholder tax bills and subsidise new business.

We believe the rules that allow Prudential to do this must be changed. If they were, policyholders would be much more likely to receive ‘special bonus’ payments as companies are required to pay out any money that is deemed ‘excess surplus’.

What can I do now?

Unfortunately, not much. If you're a policy holder, Prudential’s decision not to pursue a reattribution means your current situation won't change much. You won't be offered a one-off payment in return for giving up your right to future payments from the inherited estate. However you may receive 'special bonus' payments from the inherited estate in the future.

What happens next?

We think Prudential’s decision makes it more important for the Financial Services Authority to tighten up its lax regulation as policy holder's interests are not being protected as things stand.

Which? wants:

The FSA to ensure that the inherited estate is used to benefit policyholders instead of being used to pay shareholder tax, cover mis-selling costs, and subsidise new business.
An independent assessment of Prudential's inherited estate to find out whether any of this money is 'excess surplus' and should be paid out to policyholders. During Norwich Union's reattribution negotiations a £2.4 billion excess was unearthed resulting in special bonuses for policyholders.

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