For members of the Defined Benefit Section of the Prudential Staff Pension Scheme Your Pension. Your Future.

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1 PENSION JANUARY 2018 For members of the Defined Benefit Section of the Prudential Staff Pension Scheme Your Pension. Your Future. 1 2 The 3 Chairman s welcome Active Member Trustee Nominated Director election Trustee Board Summary of the Scheme s Annual Report & Financial Statements Valuation update The Asset and Liability Committee Trustee advisers New Administrator Summary of the DB Section of the Scheme s Annual Report & Financial Statements Interview with the Chairman Further changes to the State Pension Age Tax Codes for pensions in payment Expression of Wish Forms Your P60 7 Pensions Manager Current issues Are you up to date? Here to help 1

2 Chairman s welcome 1 It gives me great pleasure to welcome you to this year s edition of Pension Overview. The Scheme s assets increased in value by 794 million during the Scheme year ended 5 April The Defined Benefit (DB) Section assets increased by 704 million to 7,766 million, after taking into account Employer contributions, benefit payments, expenses and investment growth. Given the Scheme s strong position, the Trustee has chosen to adopt an investment strategy which seeks to ensure that any changes in the value of the liabilities are closely mirrored by changes in the value of the assets. The change in the value of the Scheme s assets was principally due to falling interest rates, which led to an increase in the value of our bond holdings. However, the falling interest rates also led to a similar increase in the value of the DB Section s liabilities (as noted above, the Trustee aims to keep the assets closely matched to the liabilities). Although the majority of the Scheme s assets are invested to match changes in the value of the liabilities, there is also a relatively small proportion invested in growth assets intended to out-perform the liabilities over time. I am very pleased to record that the overall investment assets of the DB Section of the Scheme (both matching and growth combined) out-performed their benchmark over the 12 months to 5 April After allowing for income, capital gains and movements in market values, the return on the DB Section s assets for the 12 months to 5 April 2017 was 14.8%, 1% over benchmark. This out-performance will have positively contributed to the DB Section s funding. Work has commenced on the triennial valuation of the DB Section as at 5 April 2017 and should be finalised by June As a result no Summary Funding Statement as at 5 April 2017 will be sent this year, but an update on the 5 April 2017 valuation results will be issued in late Summer The Trustee Directors of the Scheme are responsible for running the Scheme in accordance with the Scheme s Trust Deed and Rules and Statutory Regulations. The Trustee is working with the Scheme s Communications adviser to update the Scheme s website. Hopefully DC Section members will have noticed the refreshed and easier to navigate pages. Improvements to the DB Section pages are scheduled for summer During the Scheme year the only changes to the Trustee Board were the appointment of William Rutherford (Director, Prudential Capital plc) who was appointed on 12 April 2016 by the active membership and John Paino who was appointed on 17 July 2016 by the pensioner membership. Since the year end, Karen Robinson, a Company Appointed Director resigned on 31 July The Company is yet to appoint a replacement. Deborah Webb, a Member Nominated Trustee Director, resigned on 6 December An election will be held in early 2018 to fill this vacancy. I would like to thank both Karen and Deborah for their contribution to the Trustee Board. As usual, the year has been a busy one for all of us involved in administering and managing the Scheme. I would like to extend my thanks to the Pensions Manager and her team, the Scheme s Administrators, the Scheme s advisers and my fellow Trustee Directors for their continued hard work and support throughout the year. Michael Abrahams CBE DL Chairman of the Trustee of the Prudential Staff Pension Scheme Active Member Nominated Trustee Director election Deborah Webb resigned her position as a Member Nominated Trustee Director on 6 December The Trustee will be seeking nominations from the active membership of the Scheme to fill this role. If you are an active member of the Scheme look out for further communications regarding this in early Pension Overview DB Section January 2018 Prudential Staff Pension Scheme

3 The Trustee Board The Board of Prudential Staff Pensions Limited is made up of ten Trustee Directors, six of whom are appointed by the Company and four who are elected by the members. The current Board members are: Michael Abrahams CBE DL Company Appointed Chairman David Green Company Appointed Trustee Director David Higgins Company Appointed Trustee Director David Martin Company Appointed Trustee Director Andrew Swan Company Appointed Trustee Director John Paino Member Nominated Trustee Director (to serve until 16 July 2020) Neville Swift Member Nominated Trustee Director (to serve until 8 April 2019) William Rutherford Member Nominated Trustee Director (to serve until 11 April 2020) The Company is yet to appoint a replacement following the resignation of Karen Robinson on 31 July The Trustee will be seeking nominations from the active membership of the Scheme for a new Member Nominated Trustee Director following the resignation of Deborah Webb on 6 December Summary of the Scheme s Annual Report & Financial Statements Each year the Trustee produces the Scheme s Annual Report & Financial Statements. A summary of the financial highlights and membership for the 12 months to 5 April 2017 is shown here. You can view the full Report & Financial Statements in the Documents section of the Scheme s website. FINANCIAL HIGHLIGHTS MEMBERSHIP The total membership of the Scheme at 5 April 2017 was 42,997 of which 35,803 are members of the DB Section: DB Section active members 689 Net assets at 6 April 2016 Income (including Company and additional member contributions, transferins and other income including insurance policy income) Benefits and payments payable (including pensions, related benefits and administration expenses) 7,312.5m 55.2m ( 354.6m) DB Section pensioners and beneficiaries 19,756 42,997 DC Section active members 4,317 Net return on investments Net assets at 5 April 2017 Figures in brackets are negative. 1,093.9m 8,107.0m A summary of the DB Section of the Scheme s Annual Report & Financial Statements can be found on page four. DB Section deferred members 15,358 2 DC Section deferred members 2,877 Valuation update Work has commenced on the triennial valuation of the DB Section of the Scheme as at 5 April This should be finalised by June As a result no Summary Funding Statement as at 5 April 2017 will be sent this year, but an update on the 5 April 2017 valuation results will be issued late summer 2018.

4 The Asset and Liability Committee The Trustee has delegated some of the day-to-day responsibilities for managing the Scheme to various Committees made up of smaller groups of Trustee Directors. Each Committee has terms of reference which detail its responsibilities. All Committees report back to the Trustee Board with updates of their meetings, suggestions and recommendations. The role of the Asset and Liability Committee is to monitor DB Section funding which includes overseeing the DB Section investment performance. THE COMMITTEE IS MADE UP OF THE FOLLOWING TRUSTEE DIRECTORS Michael Abrahans CBE DL Company Appointed Chairman (Chairman of the Asset and Liability Committee) David Higgins Company Appointed Director David Martin Company Appointed Director Andrew Swan Company Appointed Director William Rutherford Member Nominated Director Trustee advisers The Trustee appoints professional advisers to assist with the running of the Scheme. A full list is shown in the Scheme s Annual Report & Financial Statements, but a number of them are listed below: Role Actuarial adviser DB Section Administrator Auditor Communications adviser Legal adviser DB Investment consultant Provider Willis Towers Watson Limited Aon Hewitt Limited until 30 June 2017 PS Administration Limited from 1 July 2017 KPMG LLP Concert Consulting (UK) Limited Mayer Brown International LLP Willis Towers Watson Limited 3 New Administrator The administration of the DB Section of the Scheme moved to PS Administration Limited (PSAL) from Aon Hewitt with effect from 1 July The role of the Administrator includes calculating and paying benefits when they are due, dealing with requests to transfer out of the Scheme, providing members with information about their benefits and helping members with any queries they may have. The change will not affect your benefits under the Scheme. It will mean however, new contact details for the Administration Team. Details can be found on page seven or you can visit the Scheme website and click on Contact then Administrators for the most up-to-date telephone number(s), and postal addresses. You should have received your new login details for MyPension the new secure member area of the Scheme website. If you have not received your login details, contact the Administration Team. MyPension provides an exciting source of information regarding your Scheme benefits. Functionality will depend on your membership status. If you are: AN ACTIVE MEMBER YOU CAN View your personal details Update your Expression of Wish details Request a retirement quotation A PENSIONER MEMBER YOU CAN View your personal details Update your address, or telephone number View your payslips online Over the coming months MyPension will be developed further, so we would encourage you to keep returning to see what s new. You can access MyPension from the home page of the Scheme website, using the button opposite. Pension Overview DB Section January 2018 Prudential Staff Pension Scheme

5 Summary of the DB Section of the Scheme s Annual Report & Financial Statements A summary of the DB Section s financial highlights for the 12 months to 5 April 2017 is shown below. You can view the full Scheme Annual Report & Financial Statements in the Documents section of the website. DB SECTION S FINANCIAL HIGHLIGHTS Net assets at 6 April ,061.0m Contributions received (including Company contributions 11.2m and additional member contributions) Transfers received - Other income - Benefits and payments payable (including pensions, related benefits ( 338.8m) and administration expenses) Net return on investments 1,031.9m Transfers between Sections 0.2m Net assets at 5 April ,765.5m Figures in brackets are negative. INVESTMENTS The investment policy for the DB Section of the Scheme is determined by the Trustee in consultation with the Principal Employer and Willis Towers Watson Limited, the appointed investment consultant. The investment objective set by the Trustee is to achieve a target level of investment return whilst minimising the amount of risk taken. In doing this, the nature and duration of the Scheme s liabilities are taken into account. The current DB Section asset allocation benchmark at 5 April 2017 is set out in the table below: INVESTMENT PERFORMANCE Allowing for income, capital gains and movements in market values, the return on the Scheme s DB Section assets for the 12 months to 5 April 2017 was 14.8% which was 1.0% above the benchmark return. For the year ended 5 April 2017, aggregate returns were driven mainly by the positive performance of the Scheme s bond holdings. Bond yields fell over the 12 months, driving returns in the liability matching assets of the Scheme as well as the multi-strategy credit mandates. All the Scheme s portfolios produced positive returns in the period, although relative to other main asset classes, UK property has seen suppressed returns since the UK Brexit referendum result. The absolute returns achieved over longer periods, together with the Scheme s benchmark returns, are shown below: Period to 5 April year 3 years 5 years DB Section return (% per annum) Benchmark return (% per annum) Details of all the investment managers are shown in the full Scheme Annual Report & Financial Statements. Asset Class UK Equities 1.6% Companies Financing Fund 0.4% Global REITs 1.0% Illiquid Credit 1.0% Distressed Debt Opportunities 1.0% Commercial Real Estate Debt 0.6% Multi-Strategy Credit 5.7% Secure Income Property 1.7% Liability matching assets* 87.0% Total 100.0% * Liability matching assets consist of Fixed Interest and Index-Linked Gilts, Corporate Bonds, Cash and Swaps. 4

6 5 Interview with the Chairman Michael s connection with Prudential began in 1981 when he was appointed a non-executive Director of Prudential Pensions Limited. In 1984 he became a non-executive Director of Prudential Corporation. In 1991 he became Deputy Chairman. The same year he became Chairman of Prudential Staff Pensions Limited. Overview: May I begin by asking you to share with us your view of the role of workplace pensions generally and how that role may have changed over the last 36 years? Michael: The whole culture of pensions has changed. In the 1960s, 1970s and 1980s, people would join Prudential and expect to stay there for their entire career but now people require portability to mirror the simple fact that people change jobs more frequently. As a consequence successive governments have provided greater flexibility for this purpose. However, the combination of low interest rates, tax changes and other legislative changes have diminished the overall value of pensions to the individual and made them more costly for companies to provide. Overview: Can I ask what in your view are the guiding principles of the Scheme? Michael: Well of course that s a fundamental question. The Trustee Directors have an absolute duty to run the Scheme in accordance with the Scheme Rules, that s the first thing. Secondly, we have a duty to run the Scheme in the best interest of the members. We must always remember that we re dealing with people s savings and in many cases with almost their entire life savings. Overview: How would you describe your role as Chairman? Michael: Well my role is to see that the Scheme is well run and properly managed and to see that it adopts best practice in everything it does, to promote harmony and teamwork amongst the Trustees and to maintain a good working relationship with the Employer. Overview: Could you please summarise the governance principles? Michael: Governance is at the very heart of what we re doing. Good governance means always putting the interests of the Scheme and the members above any personal interests. It means eliminating potential conflicts, so when a Trustee Director enters the Boardroom all other matters are subordinated - that s the essence of governance and good practice. Overview: How has our Scheme managed to maintain such a positive funding position? Michael: We re in the good shape we re in because we took a decision in the early 2000s, to de-risk, in other words to match our assets to our liabilities. The Scheme is now 90% matched and we have a small amount invested in Return Seeking Investments, in order to achieve a slightly higher return. We re fortunate that we are associated with one of the leading investors in the whole stock market with particular expertise in bonds and gilts. In addition the employer has never taken a contribution holiday. Overview: How do you approach the performance management of the advisers? Michael: The key Committee is the Asset and Liability Committee (ALCO) and ALCO is where we scrutinise performance against targets. We re very fortunate that we are able, because of our size, to deal in scale and in sophisticated investments which make it possible to achieve the best possible returns in our fixed interest and credit investments. The function of ALCO is to monitor both the investment performance of our assets and the value of our liabilities. In addition, we ve recently introduced what we call the Investment Forum which has the job of looking at new investment possibilities and new instruments to improve the performance in the return seeking area and to recommend them to ALCO. Overview: What are the key qualities that you d be looking for in a potential Trustee Director? Michael: What we look for in the Board is to have balance and diversity with a blend of knowledge and experience. So we want some people with knowledge of pensions, some with investment knowledge and experience, some with general business experience and some with financial skills. Potential Trustees must understand that when they join the Board there is a lot of work involved and a lot of papers to read. Overview: What skills did you bring to your Chairmanship from your previous life and work experiences? I know for example that you served in the Royal Marines. Michael: The Marines have had a major effect on my life because they are the masters of dealing with people and motivating them, admittedly for a different purpose. They taught me how to treat all people equally and with respect. The other thing that I do bring to the party is the experience that comes from having had a long and enormously varied business career. Overview: May I ask how you became an MBE and a CBE? Michael: In the 1980s I became involved in charitable work particularly in Ripon and the area of Yorkshire where I live. For example I co-founded a charity called the Yorkshire Children s Hospital Fund Trust which is still thriving. Much to my surprise I was awarded an MBE in late I also led a project for the urban regeneration of Ripon. The citation for my CBE which I received in 1994 said For services to the community in Yorkshire. Overview: What are your general interests when you re not working? Michael: Well I try not to have a lot of spare time. I like to keep busy. I m very lucky that my eight grandchildren all live near us at home which keeps me busy at weekends. I also have a small farm where I breed pedigree beef short-horn cattle, In addition I ve still got a number of other charitable and business interests which keep me occupied in both London and Yorkshire. Overview: Thank you for sparing some of it today. A more detailed version of the interview can be found on the Trustee page of the Scheme website. Pension Overview DB Section January 2018 Prudential Staff Pension Scheme

7 Further changes to the State Pension Age On 19 July 2017, the Government accepted the recommendation made in John Cridland s (ex-confederation of British Industry) report to bring forward the rise in the State Pension Age (SPA) for men and women to age 68. phased in between 2037 and 2039, rather than from 2044 as was originally proposed. It is estimated this decision will affect approximately six million men and women who are currently between the ages of 39 and 47. Under current plans, the SPA for women will increase to age 65 (the same as the current SPA for men) by November The SPA for both men and women will then increase to age 66 by 2020, 67 by 2028 and finally 68 by However, in this latest move announced by the Government, the rise in the SPA to age 68 will now be The announcement was made by the Secretary of State for Work and Pensions, David Gauke who said As life expectancy continues to rise and the number of people in receipt of State pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and is protected for future generations. Tax codes for pensions in payment The DB Section Administrator receives electronic notification from HM Revenue and Customs (HMRC) of changes to pensioners tax codes. HMRC are likely to write to pensioner members in January and February each year to advise them of the tax code that is to apply from the following 6 April. The DB Section Administrator will apply this code with effect from your May pension payment. This is because the April payment is paid before 6 April. If you have a query regarding your tax code, you must contact HMRC directly as they will not discuss or divulge details regarding a member s tax code with the DB Section Administrator or the Trustee. The Tax Office dealing with your Scheme pension is: Pay As You Earn and Self Assessment HM Revenue and Customs BX9 1AS Telephone +44 (0) You will need to quote the Scheme s reference 083/AP2 and your National Insurance number. If HMRC advises of a change in a pensioner s tax code after the monthly pension payroll has been run, the code will not be applied until the following month. Expression of Wish Forms As a member of the DB Section of the Scheme, you have the peace of mind that should anything happen to you, the Scheme provides benefits to your Spouse, Civil Partner and/ or Dependant(s) if you were to die before them. Some of these benefits may be payable as a lump sum at the discretion of the Trustee and normally do not form part of your estate for Inheritance Tax purposes. Lump sum death benefits are payable should an employee member die in Service or a pensioner member dies within five years of receiving their pension. It is therefore important that you complete an Expression of Wish Form which lets the Trustee know who you would prefer to receive any benefits. The Form can be downloaded from the Documents section of the website. The Trustee will also use other sources of information as part of its investigations and is not legally bound to follow your instructions. However, where no legal documents (such as a Will) exist, it can be the only source of information available to the Trustee. In the event of there not being a completed Expression of Wish Form, the Trustee has to act without your guidance when exercising its discretion. It is therefore important that you complete a Form and keep it up to date should your circumstances change. 6 Your P60 This year pensioners will receive a separate P60, it is anticipated these will be issued in May. This document is proof of the amount of tax you have paid on your pension and therefore it is important that you retain a copy for your records.

8 Pensions Manager If you have any questions which cannot be answered by the Administration Team, or you have any other comments, you can contact the Pensions Manager, Marion Steel at: Prudential Staff Pension Scheme 3 Sheldon Square Paddington London W2 6PR hrstaffpensions@prudential.co.uk Current issues To keep up to date on current issues and pensions in general, visit the News page on the Scheme website. It is updated regularly to keep you informed of all the latest developments. Are you up to date? Every year a number of members become uncontactable as they move and do not keep the Trustee informed of their new address. Keeping your personal details up to date is very important. Keeping the Trustee informed will help ensure that you receive scheme updates and importantly for employee members, allow the Administration Team to contact you when you are approaching retirement. To advise the Trustee of any updates to your personal details, contact the Administration Team (the contact details can be found below). If you are a pensioner member, you can also update your address online via the secure member area, MyPension, on the Scheme s website. We will shortly launch a facility which will allow you to provide the Trustee with your address via the Scheme website. This, in turn, will enable the Trustee to communicate with you in a digital format. We will provide you with further information once this facility is available. 7 Here to help If you have any questions about any of the topics discussed in this edition of Pension Overview, or the Scheme in general, please visit the Scheme s website. If you have a question that is personal to you and can t be answered by the website, help is available Monday to Friday (9am to 5pm UK time) from the Administration Team. Write to: The Prudential Staff Pension Scheme PS Administration Limited Priory Place New London Road Chelmsford CM2 0PP Phone: +44 (0) PSPSDB@puntersouthall.com Published by The Trustee of the Prudential Staff Pension Scheme, Laurence Pountney Hill, London EC4R 0HH. Designed and produced by Concert Consulting UK Ltd SmartPhone users can scan here for a direct link to the website using an appropriate QR reader app. Pension Overview DB Section January 2018 Prudential Staff Pension Scheme