Half a million existing Equitable Life with-profit policy holders will see reduced returns for the y...
Half a million existing Equitable Life with-profit policy holders will see reduced returns for the year 2000-01 as a result of last week's House of Lords ruling.
The families of approximately 20,000 customers who have died since taking out the guaranteed annuity policies will not benefit as a result of the decision. Equitable has stated its remaining 150,000 customers, who are not with-profit policy holders and whose policies include conventional annuities and unit linked funds, will see no impact on their policies.
Tom McPhail, pensions development manager at intermediaries Torquil Clark, said advisers were very likely to have used Equitable to purchase annuity or pension products. He added that IFAs and policyholders could only sit tight and await the outcome of takeover talks. He added: "The most important thing to watch out for is the level of cash injection. The ideal outcome would be for the bidder to inject the £1.5bn to cover the liability, which would at least mean that with-profits holders know where they stand."
McPhail added that he would be looking very closely at the company's free asset ratio and its next bonus announcement to see how badly with-profits policies have been affected.
Unit-linked policyholders will also need to keep an eye on who ends up managing their money once Equitable is taken over.
McPhail said: "If it gets bought out in its entirety and is allowed to continue operating with the same fund managers, that's fine, but if it is forced to merge with an existing financial arm, investors might find their money being managed by someone with a completely different track record."
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