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New exodus on way as Equitable cuts again

IFAs believe Equitable Life&#39s decision to slash terminal bonuses by 4 per cent will lead to a renewed exodus of policyholders despite the imposition of an increased market value adjuster of 14 per cent.

They question Equitable&#39s rationale for the new restrictions, as a letter sent to policyholders claims the company&#39s position has improved. It says its lower stockmarket exposure was relatively good news and the outflow from its funds was down from £776.5m in October 2001 to £231m last month.

The interim bonus for last year has also been cut again to 4 per cent after being originally declared at 6 per cent.

Equitable is suing former auditors Ernst & Young for up to £2.6bn and is considering its position regarding former directors. It will await the outcome of the Penrose inquiry before deciding whether to sue the FSA.

Hargreaves Lansdown pension development manager Danny Cox says: “Equitable is sending out contradictory messages. Coming so soon after the compromise agreement, clients will view this as a kick in the teeth for their loyalty.”

Syndaxi principal Robert Reid says: “This is going to spark off a bigger stampede than before. The announcement means exit stage left.”

Equitable Life chairman Vanni Treves says: “It is clear from the reduction in people leaving the society that the vast majority want to stay. Therefore it is very important the board safeguards the with-profits fund for the benefit of continuing policyholders.”

Equitable has appointed Ron Bullen, leader of the Equitable Policyholders Action Group to its board along with Fred Sheddon and Charles Bellringer.

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