The Prudential in the UK is marketing guarantees for its PruFund Growth and PruFund Cautious funds.
The assurer, which says it hopes to reaffirm its position as a leading provider of guarantees to the intermediary market, will offer capital guarantees on its pensions and onshore bonds from 1.05% pa for a five-year guarantee on its Cautious fund, up to 0.15% pa for ten-year principal protection. Protected Growth Fund options also start at 1.05% pa but for a six-year lock-in, dropping to 0.3% for a ten-year term. Offshore terms are available but cost more owing to the fees associated with these products, says the firm.
"In-depth research, feedback from IFAs and existing sales leave us certain that guarantees are a massive business driver for IFAs because more and more customers want them," said John Warburton, Prudential's product director.
The firm says it is supporting the guarantees with a comprehensive marketing campaign and an online tool to help advisers calculate the different guarantee options for their clients.
PruFund's Cautious Fund currently invests around 70% in a well diversified portfolio of fixed interest securities and holdings of cash and money market instruments, with the balance in UK and international shares, property and alternative assets. The Growth fund currently invests in UK and international equities, property, fixed-interest securities, index-linked securities and other specialist investments.
The guarantees are backed by the firm's £65.5bn With-Profits Fund, which uses a quantitative 'smoothing' formula to reduce volatility. This Fund receives the charges taken for the guarantees and bears the cost of any additional units created in respect of those guarantees. The firm said it may choose to hedge the guarantees in the market at some point in the future.