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Real story behind Equitable with-profits figures

Warning to Equitable mem-bers, IFAs, tied agents and Money Marketing. Like

most people, I have read in the papers and some financial publications

headlines such as Equitable cuts values by 16 per cent plus they will lose

an extra 7.5 per cent if they move. The implic-ation is that a person who

stays loses 16 per cent, a person who leaves 23.5 per cent.

However, on speaking to Equitable, I have found the story to be different.

I have been told the 16 per cent relates to the non-guaranteed element of a

client&#39s withprofits policy and not to the guaranteed element and that they

would suffer the full 16 per cent on the total only if they moved (plus the

extra 7.5 per cent).

This makes a dramatic difference and I wonder how many customers of

Equitable and indeed IFAs know this. To illustrate the huge difference, a

friend of mine was contacted about her and her partner&#39s policy. The total

valueis £52,000. They were being encouraged to switch from Equitable

by an ex-Equitable adviser now working as an IFA.

Typical understanding – Current £52,000.

Net value if transfer £39,780. Resultant net value in new plan after

3 per cent charge £38,586 actual (if data from Equitable correct).

I explained she needed to check her last statement to see the breakdown of

the policies.

Guaranteed £40,000.

Non-guaranteed £12,000.

16 per cent reduction on non-guaranteed £1,920.

Net figure £50,080.Points to make:

If they followed the adviser – and they thought she was correct from the

articles they had read in the papers – they would have lost a needless

£11,494 – a huge difference between incorrect picture and reality.

The new fund would have to grow by nearly 30 per cent to equal what is

left with Equitable.

The actual 16 per cent on non-guaranteed equated to a 3.7 per cent fall in

the total. I expect many people would have been happy with that compared

with the falls in the markets over the last 12 months

How many people have switched or are switching

now without knowing the true picture?

Will we have another pension scandal when those who have switched find out

the truth and sue their advisers?

Martin Brook Brook Financial Advice

Torquay, Devon


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