Equitable Life’s 5 per cent market value reduction could fall foul of the FSA’s clampdown on the application of MVRs by with-profits pension providers, according to Hargreaves Lansdown.
The FSA’s consultation on protecting with-profits policyholders, published last week, proposes a tightening of the rules governing MVRs.
Hargreaves Lansdown pensions analyst Laith Khalaf says Equitable Life’s MVR, which is levied on policyholders who leave the fund, would “sit uncomfortably” with the regulator’s guidelines.
He says: “The FSA does not seem to want companies to apply MVRs as arbitrary penalties so, for an MVR to apply, there has to be some discrepancy between the guaranteed value and the face value of the fund.
“How will Equitable Life’s 5 per cent exit levy sit in line with these rules? My impression is that it would sit pretty uncomfortably.”
An Equitable Life spokesman refuses to confirm whether the policy would be reviewed in light of the consultation.
He says: “We are studying the FSA consultation and will res-pond within the timeframe.”