Equitable Life has acted to stem the flow of policyholders seeking a quick exit by introducing an ex...
Equitable Life has acted to stem the flow of policyholders seeking a quick exit by introducing an exit charge of 20% of final bonuses.
The group has dismissed suggestions of court action after an employer was reported to have accused the company of breach of contract for introducing the market value adjustment (MVA).
Allistair Dunbar, Equitable Life spokesman, said the charge on the total fund is more likely to be 4% because the average investment would have built up many years of reversionary bonuses, which would not be affected by the 20% charge on the terminal bonus.
Dunbar insisted that, despite the reduced surrender values, Equitable is still offering competitive rates when compared with its peers. He said the company had taken the measures to protect remaining investors in case of panic by other members.
A sudden reduction in the size of the fund could adversely affect smoothing and the fund's ability to realise full value in the event of a short term correction.
Dunbar said full market value was still available to policyholders ending their scheme to buy an annuity. He added this applied to policyholders of any retirement age and included those using the open market option.
Tom McPhail, pensions development manager at IFA Torquil Clark, said the 20% adjustment was legitimate and would probably remain in place until the company was bought out.
He said: "It's entirely in the rules but the fact they have to take such measure indicates the difficulties facing the society.
"If the company lost its salesforce it would suddenly become far less attractive because it would not be attracting new business. That's why they've been reported to be offering £25,000 a head in golden handcuffs. But the same applies to its funds under management where a loss in value would also make them less attractive."
Targeting intermediary market
Represents £8trn in assets
Simplify and modernise
Retirement Planner Forum 2019