Attack the underperforming excess cash your clients may have on deposit
Things your clients should know about keeping money on deposit….
- The real value of £30,000 after 10 years in a deposit account is just £30,4432
- Your clients may only need to keep around £5204 on deposit as anemergency fund (it’s a good idea for your clients to keep enough moneyin an instant access account to cover their living costs for three months)3
- 88% of branch based easy access accounts leave savings worth less in real terms than when originally invested (because of the effects of tax and inflation)4
- Commonly quoted deposit rates begin to look less impressive once your clients pay tax –
| Type of Account | Gross Rate pa/AER | Net Rate for basic rate taxpayers | Net Rate for higher rate taxpayers |
| Average 90 day Deposit Account* | 3.06% | 2.45% | 1.84% |
| NS&I Investment Account** | 3.55% | 2.84% | 2.13% |
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*Standard & Poor’s Micropal, as at 28 July 2004 **www.nsandi.com, as at 28 July 2004, based on deposits of £25,000-£49,999. | |||
But now there’s a new way of investing that offers your clients a potentially better return than cash, with less volatility of direct stockmarket investment.It’s called the PruFund Investment Plan.
It’s a lump sum investment plan that may be appropriate for your clients if they want their money to have growth potential or if they are looking for an income†. The funds in which it invests are lower to medium risk and it is designed to be held over the medium to long term. It includes a small element of life assurance and offers tax benefits to those taking an income.
Here are some key features –
- It invests in Prudential's With-Profits fund – the largest of its kind in the UK. This fund invests in a wide range of different types of investments which means that your clients don’t have all their eggs in one basket.
- It also offers protection against some of the ups and downs of these investments through a formula specially designed to help reduce volatility
- It provides 6 monthly statements with Expected Growth Rates declared quarterly. The rates are available on www.pruifa.co.uk and on www.pru.co.uk.
For more information on the PruFund Investment Plan, talk to your usual Prudential contact or see www.pruifa.co.uk where you can access full product info, request an illustration and download pdfs of the marketing literature available.
- Prudential estimate of money held on deposit, as at March 2004
- Standard & Poor’s. This is the current of rate 2.45% net of basic rate tax based on a £30,000 investment in a 90 day deposit account or better offered by the 20 largest building societies. As at 28 July 2004. The rate of inflation used is 2.3% (Office of National Statistics, www.statistics.go.uk).
- HMSO Report ‘Family Spending – A report on the 2002-2003 Expenditure and Food Survey’ June 2004.
- www.egg.com. Press release, ‘High street savings offer ‘unreal’ returns’, published April 2004.
The value of your client's plan may fluctuate and there could be times when they may not get back the full amount of their original investment – it will depend on the value of the underlying investments and our formula that helps reduce volatility.
†Where we refer to income we are referring to regular payments your clients may choose to receive from their PruFund Investment Plan. The Inland Revenue may not tax these regular payments as income in the same way that they treat dividends or interest. Of course, taking an income means that the amount in your client’s plan will be reduced, and if they take more income than their plan has grown by, their plan will be worth less than the amount they originally invested.
Remember that past performance is no guide to the future. The value of an investment may fluctuate and is not guaranteed.
Your clients may not get back the full amount of their investment. The PruFund Investment Plan is not like building society accounts and investing in cash. It is designed to work best over the medium to longer term. Clients should consider keeping money that they might need over the shorter term in a bank or building society account, which are generally secure and readily accessible.
This information is based on our understanding of taxation, legislation and Inland Revenue practice, as at August 2004, all of which may change without notice.
Full terms and conditions of the PruFund Investment Plan are available on request.
