View more on these topics

Equitable Life to rethink adjuster in FSA crackdown

Equitable Life says it will have to consider whether it can continue to levy a “financial adjustment” on policyholders that leave the fund following the FSA’s clampdown on market value reductions.

This month, the regulator moved to prevent with-profits providers from charging an MVR if they suffer liquidity problems as a result of members leaving the fund.

An FSA spokesman said: “Under the revised rules, providers cannot retain an MVR if too many people are leaving the fund, but they can if people leave during folding markets and are walking off with more than their fair asset share. That is to protect existing policyholders.

“Under the old rules, you could apply an MVR under both. We are now saying the liquidity of the fund is an issue for the firm to manage.”

Equitable Life levies a financial adjustment, effectively an MVR, on policyholders who leave the fund before their contract term expires. It currently stands at 5 per cent but Equitable can increase or lower the charge.

One of the considerations that Equitable applies when determining the size of the financial adjustment is to recoup losses if large volumes of surrenders cause a “forced sale of illiquid assets at impaired values”.

Speaking to Money Marketing, Equitable Life chief actuary Martin Sinkinson concedes the closed with-profits fund could need to review this aspect of its principles and practices of financial management in light of the FSA policy paper.

He says: “The society at the moment has fairly large amo-unts of liquid assets so liquidity is not an issue for us and does not have a significant imp-act on the 5 per cent financial adjustment.

“We carry out annual reviews of the PPFM and if things change in terms of rules and regulations then we will take account of those changes. That is something we will have to consider.

“But we think the financial adjustment itself is still appropriate in light of the FSA’s proposals. It is there to protect existing with-profits policyholders because as a mutual organisation we do not have any other source of capital.”

AWD Chase de Vere head of communications Patrick Connolly says: “If Equitable’s with-profits fund is sensibly managed then it should not have any liquidity issues.

“This is only likely to be a problem if it holds large amo-unts of illiquid assets such as property, though as the fund is primarily cash and fixed interest it should not be an issue.”



Court of Appeal rejects union CPI challenge

Six public sector trade unions have had a bid to reverse the Government’s decision to switch pensions indexation from RPI to CPI rejected by the Court of Appeal. The unions launched the legal challenge after the change to CPI indexation, which tends to be lower than RPI, was announced by Chancellor George Osborne (pictured) in […]

Ireland back in recession

Ireland has fallen back into recession, according to preliminary figures released yesterday by the Central Statistics Office. The country’s GDP declined by 0.2 per cent over the fourth quarter of 2011, marking the fourth consecutive quarterly decline. Over the same period Gross National Product declined by 2.2 per cent. While the figures are still subject […]

Talk buy to boost Bureau

Mortgage Advice Bureau chief executive Peter Brodnicki says the acquisition of Mortgage Talk will allow the brokerage to boost its share of the newbuild market. MAB bought Mortgage Talk this week in exchange for shares in the MAB Group. MT chairman Peter Birch will join the MAB board as the second-biggest shareholder while Brodnicki will […]

OFT gives go-ahead to Mortgage Brain and MortgageStream merger

The Office of Fair Trading has given the go-ahead for Mortgage Brain to acquire MortgageStream. The OFT announced in January that it was stepping in to investigate the proposed acquisition over fears it could substantially lessen competition in the market. But a spokesman for the OFT says: “The OFT has decided, on the information currently […]

Mothers missing out on millions

By Steve Webb, director of policy and external communications The ninth Royal London Policy Paper discusses how thousands of mothers are missing out on state pension rights when they don’t have to Earlier this month we published the ninth Royal London Policy Paper, entitled ‘Mothers Missing out on Millions’. It focuses on the thousands of mothers […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm