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Sell-off plea as Equitable Life slashes annuities

Annuity Direct director Stuart Bayliss is calling on Equitable Life to sell its term insurance and conventional annuity business and liquidate its remaining assets amid fears that the stricken insurer is edging closer to insolvency.

In its interim report last week, Equitable cut annuities by up to 30 per cent and disclosed that it could breach regulatory solvency margins.

It says its assets exceed its liabilities by only £400m. The FSA requires a buffer zone of 4 per cent more in assets to liabilities.

The Equitable interim report says: “The board recognises the possibility that the society may not meet its required minimum margin.”

Bayliss says: “My concern is not so much that Equitable will become insolvent but that policyholders will be stuck in a bond fund without any bonuses. Equitable should pursue a second disposal of the term and conventional annuity business, allowing for the liquidation of the remainder.”

PricewaterhouseCoopers, which audited the results, says, due to fundamental uncertainty, it could not say if there were sufficient funds to meet the costs of misselling and guaranteed annuities.

From February next year, Equitable will cut with-profits annuities by 20 per cent, with further cuts of up to another 10 per cent to follow. The firm claims it will still meet all contractual guarantees.

Nicholas Oglethorpe, who has an annuity with Equitable, says: “I have heard nightmare stories about policyholders having to sell their homes or return to work. When is the FSA going to talk turkey and compensate us?”

An Equitable spokesman says: “The board has reviewed all the options and concluded that policyholders&#39 best interests are served by tight management of the with-profits fund.”

FSA spokesman Patrick Humphris says: “We have a handful of people in almost daily contact with Equitable. If it breached regulatory solvency requirements, it would not be a case of putting it straight into administration.”

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