Equitable Life policyholders today might today be left wondering if this is in fact their own annus ...
Equitable Life policyholders today might today be left wondering if this is in fact their own annus horribilus after the life group announced it is to cut future returns.
The latest upset for Equitable customers -following the decision earlier this year to close its books to new business - is that the life group is to cut policy returns as it takes into consideration the under-performance of investments.
In addition to cutting policy returns by 14% for life assurance policyholders and 16% for pension policyholders to 5% and 6% respectively from July onwards, Equitable say there will be no growth on policies between the new year and end of June this year. Any policies surrendered early will have market value adjustments cut from 15% to 7.5% and so bring values closer to the value of underlying investments.
The decision to curb growth rates is born out of the financial review undertaken following Equitable's AGM in May, which concluded that a cut in growth rates was necessary in order to protect the long-term interests of the society and its policyholders.
Equitable said the decision taken with immediate effect could not be delayed because of poor market performance over the last 18 months, maturity values exceeding underlying investments and due to increasing numbers of Equitable investors retiring and collecting their investments.
Addressing the concerns of investors, Equitable chairman Vannie Treves said difficult times require difficult decisions.
"We very much regret the need to reduce bonuses and the great concern this will cause policyholders, particularly after the disappointments they have suffered in the past year," said Treves.
Chief executive Charles Thomson said: "This was a hard decision but in our current situation we must not pay out policy values significantly above the level of underlying investments. If we do, those leaving now will gain at the expense of those who remain."
Referring to events of last year Thomson added that work is taking place to develop a proposed compromise scheme between policyholders with guaranteed annuity rates and those without adding that Equitable is to issue a consultation document in the near future.
"If a successful compromise is achieved the society will be financially stronger, we will have greater investment freedom and will be better able to weather market fluctuations."
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