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Drawdown changes may mean holders dodge MVA sting

Imminent changes to income-drawdown regulations could spell a mass exodus of Equitable Life policyholders who could use the rules to avoid being stung by market value adjustment penalties.

The Inland Revenue has confirmed that by the end of January it will introduce changes to allow pensioners already drawing down income to transfer providers for the first time.

Because the proposed rules are new, they are not included in the terms of Equitable&#39s estimated 9,000 drawdown policyholders&#39 contracts, meaning they may be able to transfer away from the life office without incurring the 10 per cent MVA Equitable is imposing on transfers.

The drawdown changes are part of transfer regulations which have been under consultation since July. The bulk of these regulations are set to be fin alised in April, 2001.

IFAs could look forward to a torrent of business following the changes but controversy now surrounds whether the 9,000 policyholders can transfer from Equitable without the 10 per cent sting.

Wentworth Rose annuities manager Steven Thur good says: “Whether this will impact on Equitable policyholders depends on whether Equitable chooses to categorise this as a contractual or non-contractual event.

“If they decide it is outside the terms of the contract, then these new rules could allow incomedrawdown policyholders to transfer without being hit by the MVA penalty.”

But Equitable Life sen ior manager (media and PR) Nigel Webb says: “It is definitely a non-contractual event because the rules were not there from the outset but there is another factor to apply. We won&#39t make any decision until the rules are introduced but whether we decide to apply the MVA will also depend on market value.”


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