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The compromise deal offered by Equitable Life to its policyholders has been accepted. The deal where policyholders with guaranteed pensions will receive an average increase in their pension fund of 17.5% in return for giving up their guarantees and those without guarantees will receive an average uplift of 2.5% was 'overwhelmingly' approved by policyholders.
Over 97% of the vote (counting by either number or value) voted for the compromise deal, with the results exceeding the minimum requirements (at least 50% of policyholders by number, and 75% by policy value).
Although this may be seen by many as a positive move forward, there are those who view this differently. The giving up of the right to take legal action, as part of the compromise deal, has led some to leave the Society and preserve their rights to sue. For this reason as well as others it means that for Equitable Life, although the compromise has been accepted, that may not be the end of the story.
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There are areas where there is still remaining uncertainty. First, and foremost, is the High Court hearing of the 4th of February. Without the approval of Mr Justice Lloyd things will not move forward. This case is expected to last 4 to 5 days.
Secondly, is the risk of possible future litigation as some members feel that they have been mis-sold policies. In particular those who claim that they were sold policies during a time that Equitable Life knew of the GAR liability.
Given all these uncertainties, making the right decision now could make a huge difference to your retirement, and raises a new issue, what to do next?
To fully answer this question the individuals concerned should seek financial advice as everybody's circumstances and objectives are different. However, as a broad guide, we feel Equitable Life policyholders now fall into two areas, those funds not subject to a Market Value Adjuster (MVA) and those funds that are subject to a MVA.
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Funds not subject to a MVA
Those wishing to take their benefits immediately, and eligible to do so i.e. aged 50 and above, can take their benefits by either the Income Drawdown or Annuity route without a MVA applying. Therefore, the decision is whether or not you need to start drawing your benefits now.
Funds that are subject to a MVA
The MVA is currently at 10% and should you wish to transfer your fund to another provider you will be penalised accordingly, also, your fund will be subject to setting up costs levied by the new provider. The level of these costs varies from provider to provider. Therefore, should you transfer out, your fund would need to perform at a level above that if you had remained with Equitable Life.
Overall Equitable Life's fund performance was better than average last year and the indications are that their fund performance should be similar in the short term.
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Should you transfer out it will be difficult for your new arrangement to recover to its original value before the transfer especially if there is only a short period of time until you wish to take your benefits. Therefore, we feel it could be in your best interest to remain with Equitable Life.
And finally,
Over the next few weeks Equitable Life will inevitably receive more media attention including comments and views being passed by all parties following the unfolding saga. Your decision on what to do next should not solely be based on how Equitable Life is reported in the media or to transfer out for the sake of transferring. What to do next is an important decision and I cannot stress enough the importance of receiving financial advice before you decide what is best for you.
Please feel free to contact Annuity Direct should you require advice concerning your options surrounding Equitable Life or indeed any aspect of Retirement Planning.
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Stuart Bayliss, Director, Annuity Direct
Tel: 020 7684 5000
30/01/2002
Please follow this link for background information on the Equitable Life situation
Please use this link to review current information from the Financial Services Authority
or Equitable Life's web site.
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