Investment - Articles - Prudential see surge of drawdown money go into PruFund


Prudential is seeing a surge of drawdown money into its multi-asset PruFund highlighting the case for protecting capital while generating a sustainable income.

 Prudential retirement income expert Vince Smith-Hughes:
 “We are taking a lot of drawdown money into our PruFund range, which has an expected growth rate (EGR) range of between 6.4% and 7.4% before charges. The expected growth rate on the fund is the rate which assets will earn and is set each quarter in advance.
  
 Our view on the EGR has seldom changed since PruFund was launched which means the fund has delivered consistent returns which we believe meets the needs of many customers.
  
 “The expected growth rate for these funds is set quarterly by Prudential based on the expected long-term investment returns on the assets of each fund. These funds have a very good long term track record of meeting their EGRs as well as smoothing out day to day volatility in the funds. This helps to eradicate the risk of negative pound cost averaging when income is being drawn.
  
 “Clearly there is no guarantee that income at this level can be maintained, however our track record and the diverse nature of the funds has shown that over the longer term, income of around 5% per annum should be sustainable while preserving the member’s capital.
  
 “Since freedom and choice in pensions became a reality, the pendulum has swung for many towards drawdown rather than annuities. However, there is a real danger that people will run out of money by taking too much income. Conversely, there is also a danger that some will adopt ‘reckless prudence’ – going into drawdown and taking less income that they really either need or want on the basis that they are being overly cautious. For these people it could be they would be better suited to an annuity. For those prepared to take some investment risk, speaking to an adviser about investing in a multi-asset fund for drawdown that smooths out day-to-day fluctuations and basing their income on solid predictions could be the right choice. This could give them the income they want, and given the significant improvement in pension death benefits also preserve a nest egg for their loved ones.”

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