Who is Prudential?
Prudential is a financial services, and life insurance company, with product offerings in areas such as life cover, savings plans and lump sum. The International Portfolio Bond is a lump sum premium.
Where is Prudential sold?
They are sold worldwide in Dubai, Qatar, Hong Kong, Singapore, Malaysia, China and other expat destinations.
Compared to RL360, Hansard and a few others, Prudential isn’t as widely sold in the expat market.
In fact, they cannot be sold in numerous markets.
What are the minimums?
Prudential have very low minimums of $25,000, 20,000 Euros or 15,000GBP. Top ups come with the same minimums – for example, 15,000GBP is the minimum top-ups for the British Pound Accounts.
What are the fees and general terms and conditions?
The charges are taken out for as long as 10 years and aren’t very transparent. The reason is that the charging structure that is chosen (commission-free or with commission) can mean that client X is paying more than client Y for the same product.
In general, the charges are:
- Establishment charge of up to 5%. This charge lasts for 5-10 years, often working out at 1%+ per year. This charge goes down to 0% after this time.
- Fund charges, which can be anything from 0.1% to 3%, but typically 1.5% on most actively managed funds
- Admin charges.
- Broker management fee charge – typically 1%.
This plan isn’t the most expensive in the market, therefore, but it also isn’t cheap.
What’re the positives about the plan?
1. You can earn more than in the bank even with high costs
2. It isn’t as high cost as some options but is still expensive
What are the negatives about the plan?
1. It is expensive, especially if the most expensive upfront costs are taken on day 1.
2. The investment choice is limited. PruFund Range of Funds and the Dynamic Portfolios and Dynamic Focused Portfolios are both available. However, the number of low-cost funds available is limited.
3. Many high-risk and high-fee funds are used in tandem with this product. This often leads to losses.
Are there charges for getting out of this product?
Yes, there are, but it depends on how much you want to withdraw. On day 1, most clients can withdraw 70%+ or more of their money, without penalty, assuming the funds are liquid funds, which can be sold relatively quickly and without penalty.
Just because the provider allows penalty-free withdrawals, doesn’t mean there aren’t charges for getting out of the investments chosen within the platform.
If there are charges for getting out of the product, what can I do?
It depends on each case. In some cases, reducing the management fee and fund charges can make a difference.
For instance, if somebody has already been invested for 10 years, the establishment charge doesn’t apply any longer.
In such cases, simply reducing the other fees, could increase performance. For many other clients, however, it is possible to get the same funds, for a cheaper price, with cheaper platforms and providers.
This will make a big difference over time. If you have $100,000 in your account and markets go up 8% per year, for the next 5 years, you are only likely to get 4% per year returns in this product, due to the numerous charges.
What can you do if you have a Prudential policy offshore?