Prudential plans to offer adviser charging on the following products from R-Day:
Annuities
- Guaranteed Pensions Annuity
- Income Choice Annuity
Pensions
- Flexible Retirement Plan (including Drawdown)
- Trustee Investment Plan
Onshore bonds
- Prudence Inheritance Bond
- Prudential Investment Plan
Offshore products
- Portfolio Account
- International Prudence Bond
Adviser charges will be agreed between advisers and their clients, and once instructions to apply them are received from the client, Prudential will implement them.
How the adviser charges will work
Set-up adviser charges for single premium
• A percentage of a client's payment, premium or transfer value.
or
• A specified monetary amount.
Set-up adviser charges for regular premium
• A percentage of premium taken from each premium.
• If advisers and their clients prefer to have the option, Prudential plans to accommodate one percentage level of charge for an initial period (up to a maximum of 60 months).
Ongoing adviser charges
• A percentage of the fund.
• A percentage of total investment.
• Specified monetary amount.
• Charges may be taken from fund or income payments depending on product.
• Prudential will offer a range of frequencies for ongoing charges.
Ad hoc adviser charges
• Prudential will also be able to facilitate ad hoc
adviser charges from certain products.
Adviser charges – timing of deductions
Set-up adviser charges
• Annuities – the charge will be taken from Annuity Purchase Price (vesting amount after tax-free cash).
• Income drawdown – the charge will be taken from transfer value invested after deduction of any tax-free cash.
• Pensions – for regular and single premiums, the charge will be taken from the gross premium invested, after tax-relief has been applied. For transfers the charge is taken from the transfer value invested.
• Bonds – the charge will be taken from the money paid by the client before the contract is set up. The premium is the client payment less the adviser charge.
Ongoing and ad-hoc charges
• Income Choice Annuity – the charge is taken from the post-tax income due to the client.
• Pensions and Income Drawdown – the charge is taken from the fund.
• Bonds – the charge is taken from fund (Prudential Investment Plan and International Bonds), or from distribution income (Prudence Inheritance Bond).
Prudential has adopted a flexible approach to facilitating adviser charging with the adviser's client remaining in control throughout. Advisers' clients simply need to instruct Prudential (via a simple section on the application form) on the adviser charge it should facilitate for them – including whether to start, stop, increase or decrease any charges. Prudential will also act on instructions received directly from advisers, providing they are in relation to decreasing or stopping adviser charging. Advisers and their clients can agree to choose different frequencies for ongoing charges. Depending on the product being considered, the client will have the option to pay the adviser charge monthly, quarterly, half yearly, or yearly.
Russell Warwick, distribution change director at Prudential, said: "We are well prepared for R-Day, and our flexible ability to facilitate advising charging aims to make life easier for advisers and their clients at a time of significant industry change. The important thing for advisers is to have simple processes to maintain their cash flow post-RDR. Our aim has been to create an easy payment method to assist the process of adviser charging. We have the systems and capability in place to facilitate the charge, which means that advisers using us will not have to collect their fees directly from their client, unless they specifically wish to do so."
Prudential plans to make a number of other changes, including making legacy products compliant for adviser top-ups, and these developments will be communicated later in the year