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How good is Prudential's International Prudence Bond?

Prudential four stars


Prudential Spanish bond review. Only available via financial advisers, The International Prudence Bond (Spain) from Prudential International is one of the most popular investment vehicles for residents of Spain. Many people know the name from the UK and remember the famous 'man from The Pru' adverts on TV in years gone by. So the Prudential name gives a certain amount of confidence and security, particularly with UK expatriates. With current expected growth rates (as of May 2019) for the Pru cautious fund at 5.50% (Sterling) and 4.80% (Euro) it is an excellent option for the lower risk investor. The other aspect that attracts many people to this investment product is Prudential's well known "smoothing effect". This translates into a very steady, if modest, rate of return year on year. Of the portfolio bonds available to an expatriate in Spain it is the most reliable in this way - which tends to be very appealing for the more cautious investor.
As with most Spanish compliant bonds it is given generous tax benefits. These include capital gains deferral and proportional tax relief on withdrawals. Why are these important? Well, the tax deferral means the growth of the policy should be better as no tax is deducted from gains at source (so you have the compounding effect) and one can choose the best time to withdraw from the bond in order to minimise future liabilities. Furthermore, as it is set up as a 'whole of life' assurance policy it can be in joint (or more) names, so in the event of death 100% ownership of the policy passes to (for example) the surviving spouse without any expensive, time consuming Spanish probate procedures. This could be very important if quick access is needed for funeral costs or repatriation etc. You can also name specific beneficiaries such as your children, grandchildren or perhaps a charity.
What is also of importance are the investment funds sitting inside the bond. After all, it is the performance of these that make the growth happen. With the Pru bond you are restricted to Prudential's own funds ('Prufund Growth' and 'Prufund Cautious' for example). Not an issue for most unless you are a more sophisticated client requiring more specific assets to be held.

Verdict

Pros:

1) A name that many know and trust.
2) Smoothing effect giving steady, reliable returns.
3) Consistently beats the interest rates offered by most banks.
4) One of the largest life companies in the world with a huge investment fund - £657 billion total funds under management.
5) High levels of investor protection.
6) If you invest more than £75,000 they add 0.5% of the bond value as a bonus on starting your policy and if you invest over £150,000, they will give you 1.5% of the bond value.

Cons:

1) Quite restrictive compared with other Spanish compliant bonds.
2) Only Prudential's own funds allowed in the bond so difficult to make a bespoke individual solution.
3) Modest growth rates.

Conclusion:

Although the Pru bond is never going to set your world on fire with stellar growth, it is undoubtedly the investment of choice for those wishing to beat the poor interest rates offered by the banks and fight the effects of inflation on your capital without taking too much risk.

If you would like more information please fill out the form below or call me direct on +34 951 390 201

Patrick Macdonald Financial Adviser
Patrick Macdonald ASCI
International Financial Adviser

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