The £126bn Prudential with profits fund is set to share £3.5bn with more than 2m of its policyholders, owner M&G Wealth has revealed.

The with profits fund is believed to be the largest fund of its kind in the UK.

Its main asset pool returned 4.3% over the 12 months to the end of 2023 allowing it to pay £3bn to traditional and accumulating with profits policyholders through its annual with-profits bonus declaration.

The return includes their share of £1bn of additional money that has built up in the fund over many years, M&G said.

Eligible traditional and accumulating with profits customers, have had the unsmoothed value of their plans increased by 1.25%, reflected in final bonuses from this year.

The company has shared some of the additional money with customers of its PruFund fund range, as it is also written in its with profits fund. Customers have had their unit prices by increased by 0.9%, effective on 27 February.

What the bonus payments mean for different types of with profits customers:

• A single premium of £10,000 invested in the PAC With Profits Bond (Flexible Investment Plan) in 2014 will be worth £15,684 in 2024, representing an annualised return of 4.6%
• A PAC personal pension customer who has contributed £200 (gross) a month for 10 years (£24,000 in total) and is retiring on 1 May 2024 will have a fund value of £31,004, representing an annualised return of 5.0%

Clive Bolton, chief executive, M&G Life, said: “These bonuses and additional money are driven by the strong performance of the fund, despite a fragile geo-political landscape and challenging market backdrop.”

He said performance was driven by the company’s fixed income and regional equity portfolios.

He said: “The fund continues to invest in the real economy and innovative companies that are seeking to have a positive impact on the world around us, while also generating sustainable long-term financial returns.”

In the ten years to the end of 2023, the fund produced a cumulative gross return of 79.8% before tax and charges, which compares with the 37% return from the ‘ABI UK – Mixed Investment 20% - 60% Shares Sector Average – Pension Funds’ over the same period, the firm said.

Notable investments in the fund include 40 Leadenhall, set to be the largest office development to complete in the City of London this year and is among the UK’s first buildings to achieve one of the highest accreditations for sustainability.