group relaunching prudence bond with initial charge options and choice of two optimum funds
A change in Prudential's branding and a wide-ranging marketing campaign from the company is set to back-up the relaunch of one of the biggest selling bonds on the market, the Prudence Bond.
As first reported in Investment Week, the company is to offer a new version of the bond with no initial charge and a minimum 100% allocation rate.
The company has confirmed that investors will be rewarded with 0.25% Annual Growth Reward (AGR) following the first year of the bond, provided the investment remains untouched. The 0.25% applies to each year of the remaining four of the first five years of the bond term, again provided that no money is taken out in each year.
Commission is to be set at a standard rate of 5.25%, slightly lower than was available under the previous arrangements.
The 'no initial charge' option on the bond features no front- end or establishment charge but will be subject to an annual 1.3% implicit with-profits charge based on a 6%pa investment return.
A new initial charge option will also be available and the existing initial charge structure on the bond will only be available until the end of March. Investors choosing the new initial charge option will be subject to a front-end fee of 5% plus a 1% with-profits charge.
There will be a choice of two portfolios: the Optimum Return and the Optimum Bonus funds. Optimum Return features a yield of 7.25% on the initial charge version and 6.95% on the no upfront charge option. It also offers an annual reversionary bonus of 4.5%.
The Optimum Bonus fund, which features an annual reversionary bonus of 5.75%, has a yield of 6.75% for the initial charge option and 6.45% for the no initial charge option.
As part of a tenth anniversary deal, from July 2001 through to December 2001, the group offered an extra 2% allocation on the Prudence Bond. This provided investors with a reduction of yield (RIY) of 1.3% on an investment of £10,000 after five years. The changes to the Prudence Bond would compare with this offer by providing a lower RIY of 1.2% after five years for the new no initial charge option and a slightly higher RIY with the initial charge option at 1.5%.
The initial charge option becomes more favourable the longer the investment is held and for larger amounts.
The announcement of the changes to the bond comes with a change to the market literature of the group. New literature will not feature the word Prudential or the logo on its front cover. Instead, a small 'Pru' next to a descriptive adjective or product name will be the primary branding which intermediaries and the public will see.
Following the scrapping of the Scottish Amicable brand, the company has a marketing strategy to emphasise the new focus of the group.
A £20m campaign aimed at consumers is to be launched in the third quarter of this year.
Although the company has accreditation from the ABI's Raising Standards initiative, the literature for the Prudence Bond does not carry the logo, although the company claims that it is fully compliant with the new Kite mark.
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