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Windfall for Equitable Life policyholders as it plans closure

Written by: Paloma Kubiak
Equitable Life has announced a ‘new strategy’ as it plans to close in 2019, which should give policyholders an average windfall of near £7,000, if they can hold out.

The oldest mutual assurer has today announced plans to close its With Profits fund with the policies transferred to Reliance Life, a specialist European life assurance group which is part of the Life Company Consolidation Group (LCCG).

The move would see pension policy payouts rise (capital distribution) from 35% to 60-70%, provided eligible holders vote in favour of removing policy guarantees, and agree to the transfer.

According to Hargreaves Lansdown, £1.8bn will be added to 261,000 policies. This means the average windfall for policyholders is £6,900, which includes the current 35% uplift. But Hargreaves warned this is currently not guaranteed and could be withdrawn.

If you’ve previously left or moved from Equitable Life, you won’t receive a share of the payout as part of the sale.

Voting is expected to take place in mid-2019 and, with the approval of the High Court, the enhancement to With Profits policy values taking place towards the end of 2019. The transferred monies will then become unit-linked policies with Reliance Life.

What do investors need to do?

Policyholders currently receive either their guaranteed policy value or the current value plus an uplift of 35% when they transfer or surrender policies. This uplift will increase to between 60% and 70% by the end of 2019.

For now, there’s nothing policyholders should do as more information will become available from Equitable Life in due course.

‘Draws a line under the insurance society’

Danny Cox, chartered financial planner at Hargreaves Lansdown, said this is a wonderful windfall for Equitable Life policyholders, who now stand to pick up a nice bonus which is “well worth hanging on for”.

Cox said: “With Profits funds fell out of favour around the turn of the century, when Equitable almost collapsed and the entire sector had to slash policy values as markets tumbled. As a result of the shakeout these funds shuffled their portfolios into bonds in order to reduce risk. Loose monetary policy has helped to boost the value of these fixed income assets, which has now prompted Equitable to lock in these gains for policyholders.

“The closure of the With Profits fund and the end of the Society will draw a final line under the insurance society, almost two decades after the Equitable shut its doors to new business. Investors who can hang on will now see significant enhancements to their policy values. For those who can afford to do so it clearly makes sense to wait.”

Leaving on a high

Chris Wiscarson, Equitable Life’s chief executive, said: “When the Equitable closed to new business in 2000, it was inevitable that at some point the Society had to come to an end. The benefit of bringing Equitable to an end sooner rather than later is that we can capture for With Profits policyholders the near record high values of the investments backing their policies.”

Ian Brimecome, Equitable Life’s chairman, added: “While it will be sad to bring an end to the oldest mutual assurer in the world, the potential to enhance With Profits policy values to the extent made possible by a transfer to Reliance Life is fundamentally helpful in distributing capital to our policyholders as fairly and as soon as possible.

“I believe Reliance Life’s approach to customer service, investment choice and policyholder security make for a compelling way forward.”

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