Following an update from the Fund’s additional voluntary contribution (AVC) provider, Prudential, we can provide some reassurance to members regarding AVC arrangements.
Along with a number of other UK insurance companies, the Fund’s AVC provider, Prudential, has been the subject of persistent rumours about its financial strength. Prudential dismissed these rumours this week with a third-quarter update that demonstrated considerable resilience. Prudential has cash and near cash resources of £1.4 billion and a capital surplus of £1.2 billion. Even in the current turbulent markets there does not appear to be any real threat to Prudential, and indeed the company is understood to be looking to acquire some of the Asian assets of the failed American Insurance Group.
Members with AVC funds should still be aware that they do bear some investment risk. But they can be reassured by Prudential’s confirmation that:
- their financial position remains strong;
- their portfolios are well diversified to spread the investment risk; and
- in the worst case Prudential is covered under the Financial Services Compensation Scheme (FSCS).
The level of compensation under the FSCS is unlimited and is calculated as 100% of the first £2,000 and 90% of the remainder of the claim.