Prudential has added bonuses worth £2.1bn to its with profits policies in 2017, made up of an £0.4bn annual and £1.7bn final bonus.
This means policyholders will have seen year-on-year increases of between 7 per cent and 10 per cent in their accumulating with profits policy values, the firm stated, with typical mortgage endowments maturing in 2018 increasing 8.8 per cent in value in their final year.
Long term, over the space of 10 years, the policies attracted an estimated £21bn bonus, with Prudential's with profits fund delivering a cumulative investment return of 89.6 per cent (before charges and smoothing) and beating the FTSE 100 index, the insurer reported.
Clare Bousfield, chief executive of Prudential UK, said: "Our with profits fund has had another successful year's performance in 2017, yet again reinforcing the benefits to cautious investors of continuing to invest in our well-managed, financially strong and globally-diversified fund.
"The vast majority of our with profits policyholders have seen the value of their plans increase over the last 12 months.
"Our consistent long-term approach to managing the fund means that we have been able to maintain annual bonus rates at the same levels as last year while increasing final bonus rates for most customers."
Rival Legal & General posted similarly strong results for 2017, adding bonuses worth £319m to its with profits policies and achieving annual returns over 10 years of 6.3 per cent before tax.
Despite this, the company is in the process of selling the business to Swiss Re for £650m, as announced to the stock exchange in December.
Prudential stated its with profits strategy also worked well for pension plans.
It delivered a 1.5 per cent annual bonus on personal pensions with many policies maturing in 2018 had increased in value compared with their surrender value 12 months prior.
By way of example, a personal pension customer who contributed £200 a month for 20 years and is retiring on 1 May 2018 will have a fund value of £88,166, Prudential stated.
A 20-year personal pension performance relative to alternative investment products (for periods to 1 May 2018 and after charges):
Investment Product | Total Payout | Annualised Return |
Prudential With-Profits Individual Pension (20 year term, £200 per month regular premiums) | £88,166 | 5.7% |
Scottish Amicable Personal Pension (20 year term, £200 per month regular premiums) | £94,963 | 6.3% |
Morningstar 90 Day Notice (UK Savings £25,000+) Gross | £55,111 | 1.4% |
Average mixed investment 20% - 60% shares unit trust (IMA) | £92,799 | 6.2% |
Average mixed investment 20% - 60% shares unit-linked pension fund (ABI) | £86,402 | 5.5%
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Robert Forbes, Chartered financial planner at Stadden Forbes, said he tended not to use with profits as they were "a tad expensive" but he recognised the sometimes strong performance delivered by these investment vehicles.
He said: "The Pru funds have indeed been strong performers but in favourable market conditions. We will see what happens when the markets get a bit more choppy.
"Not all with profits funds have performed well and they are more complex than they appear."
carmen.reichman@ft.com
