For the five months period from 1 August to 31 December 2000, the Equitable Life Assurance Society a...
For the five months period from 1 August to 31 December 2000, the Equitable Life Assurance Society achieved overall rates of return of 8% per annum for most pension policies and 6.75% per annum for life policies and bonds.
For existing with-profits pension funds in force for the whole of 2000, this gives an effective return for the year of 3.3%, and 2.8% for life policies.
Guaranteed benefits under policies are to increase by any minimum level guaranteed in the policy. The life office has said there will be no declared guaranteed bonus at this time, and the balance of any allocated return will be passed on as final bonus.
The interim bonus rate going forward has also been set at 8% per annum for most pension policies. This interim bonus rate will be used to calculate payments from 5 March 2001 and so the 8% rate will apply for the period from 1 August 2000 until further notice. The Equitable will issue statements to relevant policyholders over a three-week period commencing on 12 March 2001.
Charles Thomson, the chief executive of Equitable Life, said: "The bonus for 2000 is affected by two things; the need to pay for the new treatment of GAR benefits which meant no growth was allocated to with-profits policies for the period 1 January to 31 January 2000; and the need to maintain as much investment flexibility as possible.
"Therefore, the rate of return of 8% per annum only applies to the months from August to December. This has been allocated through any guarantees already written into policies with the balance as final bonuses. Any declared guaranteed bonus would have had to be matched by an equivalent level of reserving, further constraining the fund's investment flexibility and leading to the probability of lower returns in the future. Therefore, we have decided to defer the declaration of guaranteed bonuses for 2000."
He added that the Equitable will consider the possibility of declaring some guaranteed bonus later in the year. A successful GAR compromise arrangement would strengthen the financial position of the company and lead to another payment into the with-profits fund from the Halifax, he said.
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