Equitable Life urgent changes for policyholders – Do You Need Help?
The end is now in sight for the sad but inevitable demise of Equitable Life, once one of the biggest and most trusted pension firms. In 2000 it ran into awful financial difficulties after promising many of its then 1.5 million customers better payouts than could be delivered.
Most of its investors had what are known as ‘with-profits’ policies which supposedly smooth out the returns from the Stockmarket by holding on to some of the money earned in good times when markets rose and paying this out when they fell. But embarrassingly, staff bungled their calculations and did not set aside enough money to pay what was promised to policyholders. This was partly due to the colossal bonuses being awarded to its salesforce, from the with-profits fund itself, despite the Company claiming that it paid no commission to “middlemen”. Some may even remember the television advert of 1990, which claimed categorically that it had no shareholders and did not pay middlemen (see https://www.youtube.com/watch?v=M6eLWOX_xbY). Unfortunately, it turned out to be not such an “Equitable Life Henry”. Many professionals were duped too, including solicitors and accountants who also did not check “under the bonnet” before encouraging their clients to trust the firm.
To save itself from collapse, the firm then slashed savers’ policies by as much as 40% which led to a court case that Equitable Life lost, leaving the business with a huge funding shortfall. It has been closed to new customers ever since.
With Government compensation and money that it has generated since (from switching into predominantly more stable bond assets, which have performed well during the interim period), it is now proposed for a one-off bonus to be paid to policies in exchange for the removal of all guarantees attaching to policies. Then, all remaining business would be transferred to a new company, Utmost Life and Pensions. However, this will only happen if eligible policyholders and members vote in favour by 31 October and if the High Court then approves the transfer in November. If it is approved, it will affect all policyholders. Ownership will transfer to Utmost and policies will be with them and not Equitable Life. You cannot opt out and if the proposals are approved, you are affected, even if you didn’t vote or voted against. It is therefore very important to vote if you are entitled to and to review options thereafter. You have to choose what type of fund you want too to avoid the default option. Mr Philip Milton of North Devon’s largest and longest established Wealth Manager commented “With many of the eligible policyholders being based in the South West, we should like to offer our complimentary help to them, as well as policyholders further afield naturally. Please do feel free to contact us if you are affected. You will have had a complicated series of letters and will have to take some action before the end of October in terms of choosing what happens to your money. Give us a call – and we may advise that it is time to say ‘thank you for the bonus’ but to move elsewhere rather than the default route, where there are only limited Utmost Life investment funds available.”