Equitable Life is slashing with-profits pension funds by 16 per cent and
life policies by 14 per cent by cutting terminal bonuses.
A fund quoted at December 31, 2000 to have a value of £50,000 will
fall to £42,000. If the guaranteed value of the fund is higher, that
value will be paid.
No reversionary bonus will be paid for the first six months of this year,
after which reversionary bonuses will accrue for the next six months at 6
per cent for pensions and 5 per cent for life insurance. It was 8 per cent
With-profits annuitants will only get 4.5 per cent growth on their
policies each year until further notice, down from 5 per cent last year.
The market value adjuster, which was increased to 15 per cent to stop
policyholders leaving the fund, has been halved to 7.5 per cent.
Policyholders who have already given instructions to surrender or take
benefits will have their fund valued on the old basis if documents are
received within 14 days of this week's announcement.
Equitable is blaming stockmarket falls for the cuts, saying it cannot keep
adding growth to policies while underlying investments are falling. It adds
that many policyholders are taking benefits this year.
Annuity Bureau director Ronnie Lymburn says: “The losses are now much
greater than that from the MVA. We had been advising customers to leave if
they had the full value of the fund and assuming they could make the money
up for the MVA. But with the current return on equities, it is not likely
to make up the extent of these cuts.”
Equitable spokesman Alistair Dunbar says: “It is not fair to allow those
taking benefits this year to take an excessively generous amount. This
brings maturity values in line with underlying investments.”