A word from our with-profit AVC provider

Planning Makes Perfect

The freedom to live life without planning is one afforded only the very young.

A two year old can wake in the morning secure in the assumption that someone else is in charge of his health, his welfare, his activities and arrangements, his food and his home. But as surely as we gather responsibilities for ourselves and others as we journey through our lives, so planning is a central part of those lives, as indispensable to stability and contentment as parental care is to that two year old.

Given that most people don’t set off for the supermarket without a plan of sorts, it is all the more remarkable that so many fail to plan properly for their retirement. Recent research carried out by Prudential (i) indicates that the income people expect to have in their retirement is 40% higher than what they will have.

There is a significant gap between what people think they need to save for retirement and what they actually need to save in order to provide them with the average income of £18,053 they want when they retire. Additionally, a striking 50% of people had no idea of the amount they need to save for retirement. Even after allowing for the basic state pension, the gulf between what people think they need to save and reality is evident across all age groups.

HOW MUCH DO YOU THINK YOU NEED TO SAVE IN YOUR PENSION TO BE ABLE TO PROVIDE AN ANNUAL INCOME OF £18,000*?



* including the Basic State Pension of £4,139 (£79.60 per week)

Making it happen
The good news is that Kingfisher offer you membership of their pension scheme but changing employers, taking time off to raise a family, delaying your contributions until later in life or retiring early could all cause a significant shortfall. The answer could be to make Additional Voluntary Contributions (AVCs) into your pension.

The Government encourages people to save appropriately for their retirement. It has made pensions one of the most tax-efficient ways to save for the future by giving tax relief on your contributions. For every £1 you pay into your AVC you receive tax relief at your highest marginal rate, this has the effect of making a £1,000 contribution only cost £780 for a basic rate tax payer or potentially as little as £600 for a higher rate tax payer
For more information talk to your financial adviser, or call the Pru on 0845 6051185.

HOW PRUDENTIAL PERFORMED - 5 YEAR RETURN TO THE END OF 2003

Wisdom, Winners and With-Profits

Pensions
The trustees of the Kingfisher Pension Scheme have chosen the Prudential’s with-profits fund as one of the investment options for investment of your Additional Voluntary Contributions. You will find that the with-profits fund offers good flexibility, allowing you to increase, decrease or even stop the contributions you make without additional charge or penalty.

If you have chosen the Pru to manage your money we at Prudential believe you have made a wise choice.

If you have yet to invest in a Prudential AVC it is even more important that you read on.

The really good news is that our 4.5 million With-Profits customers will benefit from £1.9 billion in bonuses that are being added to the value of plans in 2004. This reflects the strong performance of the Prudential With-Profits Fund, increasing in value by 27% over the last five years, as shown in the chart above. Investors have had a torrid time in recent years. Stockmarket fell dramatically between 2000 and 2002, resulting in the worst market performance for a generation – we haven’t seen such share price falls since the 1970s. This volatility is a stark reminder of the need to focus on investing for the longer term. We’ve also seen interest rates at some of the lowest levels in over 40 years and, while there have been recent increases, they’re likely to stay low as long as inflation does not pick up.

Prudential with-profits investors, however, have not suffered the full effect of either volatile Stockmarket or falling interest rates.

Smoothing the ride
To help your investment enjoy a less turbulent ride we use a concept known as “smoothing” – a key principle of with-profits. By holding back some of the returns in good years, we build up a reserve to pay out to you when Stockmarket returns fall. That way, the peaks and troughs of stockmarket movements are smoothed for you – a reassuring prospect, particularly if markets fall as you get close to retirement. You may have been concerned about seeing a reduction in the value of plans over the last few years, but this reflects the fluctuations in the stocks and shares that the With- Profits Fund has been invested in. However, the severity of these falls has been smoothed in a way that you would not have experienced had you invested directly in the stockmarket.

In praise of With-Profits
Over the last couple of years newspaper headlines about with-profits have, unfortunately, been for the wrong reasons. However, recent coverage has been more positive – and Prudential investments have been singled out for praise. An article in Investment Week (12 April 2004) by Ned Cazalet, one of the UK’s leading insurance analysts, demonstrated the benefits you get from being with Prudential. In it he praised the consistent and solid performance of our With-Profits Fund and the fact that it achieved the highest return for 2003 of the 17 with-profits funds Investment Week compared, with a rise of 16.5%. He also pointed out that over the last three years, Prudential was the only company to generate a positive return, beating the average by 11% in the process. This is a good reflection of the benefits you gain from our investment philosophy of investing for the long term and taking a 10 to 15 year perspective – an approach that many of you will adopt with your own investments. It is important to remember that past performance cannot be used as a guide to future performance, and please note that the rate of future bonuses cannot be guaranteed.

The article also highlighted how our asset allocation – our decisions on where to invest funds – had helped to generate such marketleading performance. Again industry comment about with-profits helps to explain the importance of effective asset allocation. You can rest assured that Prudential’s investment team constantly reviews the choice of investments in our With-Profits Fund to make the most of investment conditions. That’s why we didn’t suffer the full impact of the stockmarket decline between 2000 and 2002 and why we have continued to add bonuses to plans.

Prudential’s Strength – What it means for you
In today’s uncertain world, you want to ensure you invest your money with a company that is financially strong and committed to providing the best possible returns on your money.

We have more than £150 billion under management worldwide and we hold about 3% of the UK stockmarket.

Financial Expertise
Prudential were one of the first to move out of shares before the stock market fall, increasing our investment in property and fixed interest, and spreading the risk for you. We have an AA+ financial strength from Standard & Poor’s. No other UK Life company has a higher rating

Property
We have invested wisely in bricks and mortar for 125 years. We are one of the biggest owners of shopping centres in the UK, with interests in assets including Bluewater, Manchester Arndale and ‘The Centre’ at Milton Keynes.