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Cazalet in bonus warning over Equitable &#39conjuring&#39

Influential life analyst Ned Cazalet has slammed Equitable Life&#39s “Tommy Cooper” annual accounts, claiming there is little prospect of policyholders getting bonuses in the future.

Equitable&#39s annual report for 2001 says the society has changed actuarial assumptions to notionally inflate the bonus account by £850m. But commentators say this is not new money and without this move Equitable would have only £270m to pay bonuses, meaning it could only meet its contractual guarantees.

But IFAs and analysts claim the £850m exists only on paper as it was created by lifting interest rate assumptions on the basis of its enforced fixed-interest investment strategy and policyholders will not see any of the benefit.

The report shows that chairman Vanni Treves could get a bonus of £250,000 and chief executive Charles Thomson a bonus of £275,000.

Cazalet says: “It is not Tommy Cooper, you cannot conjure up money from thin air. The balance sheet cannot support any annual bonuses and it will not take much to wipe out any chance of terminal bonuses. There is a high risk of Equitable going bust.”

Hargreaves Lansdown pensions development manager Danny Cox says: “The short-term prospect of bonuses is very poor and if the markets continue to perform poorly, then there is little chance of them in future.”

An Equitable spokesman says: “Policyholders are aware the society will not be able to pay annual bonuses for the foreseeable future as we would have to reserve against them, further constraining the society&#39s investment flexibility. Guaranteed growth rates already written into policies will, of course, be honoured.”

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