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Equitable slashes bonuses but MVA is halved to 7.5%

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

last year.

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&#39s 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.”

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