Equitable Life doubles payout to with-profits holders

Equitable Life has announced it is set to double its capital distribution to 25 per cent from 1 April and will remove the 5 per cent exit charge when with-profits policyholders transfer.

The move, expected to affect its 345,000 with-profits policyholders, has been described as “pivotal” by Hargreaves Lansdown.

Equitable Life has been adding an amount equivalent to 12.5 per cent of each policy value to both transfers and maturing policies. From 1 April 2014, this capital addition is being doubled to 25 per cent and will now be added to every policy when cashed in or transferred out.

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The amount of 25 per cent could change and be higher or lower in the future, or revert to be paid to maturity policies only, Equitable Life said.

The ‘market value reduction’ is a financial adjustment designed to protect policyholders who remain with a with profits Fund.

Prior to 1 April 2014, the adjustment to policy values cashed in or transferred before maturity is 5 per cent but after this date, there will be no financial adjustment for policies cashed in or transferred. However the MVR may be added or increased at any time.

Ian Brimecome, Equitable Life chairman, said: “This is a further momentous step for the society. We consider the new capital distribution of 25 per cent to be the best example of recreating policyholder value at the Society for many years.”

Danny Cox, head of financial planning at Hargreaves Lansdown, said: “Policyholders who have stuck with the Equitable have finally been rewarded.

“Those who have felt trapped by poor returns and MVRs can now head for the exit with as much as 30 per cent more in their pocket. Importantly, any right to compensation will be retained.

“If nothing else, the 345,000 Equitable Life policyholders should take this opportunity to review their policies and check whether they remain suitable for their planning.”