Personal PensionMar 24 2015

Equitable Life increases with-profits distribution

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Equitable Life increases with-profits distribution

A statement from the company said that the increase has been made possible by both the agreement with Halifax Life last July to take back full control of its unit-linked business and the deal reached earlier this month to transfer its non-profit annuity business to Canada Life.

Chris Wiscarson, Equitable Life’s chief executive said that over the last five years, with-profits policyholders would have seen a transfer value of £10,000 grow to almost £15,500.”

The firm’s chairman Ian Brimecome added that during 2014 the society made more progress than in any of the last five years. “Our determination to return the society’s capital to its with-profits policyholders as fairly and as soon as possible, remains undimmed”.

The 35 per cent capital distribution is possible when a policy “matures, is cashed in, or in the case of a pension, is transferred”, according to Hargreaves Lansdown’s head of pension research Tom McPhail. Exit charges remain at zero for those cashing out.

Tom McPhail, head of pension research at Hargreaves Lansdown, commented that the board has achieved a commendable turn-around from the dark days of 10-15 years ago.

“The timing is particularly fortunate; with the pension freedoms just around the corner, many investors are likely to see this as an ideal opportunity to secure these gains, transfer to another pension and put the whole saga behind them.”

In terms of pension options, Hargreaves suggested several possible options.

Policyholders could “do nothing and stick it out until maturity”. Mr McPhail said: “The bonus rate for most policies is 2 per cent - better than cash but not as good as could be achieved on the stock market”.

Many will wish to “bank the improved capital distribution by transferring to another pension, particularly if they plan to use income drawdown as opposed to annuity purchase”.

Some may also want to use the open market option to buy an annuity, or wait until 6 April to use the pension freedoms and cash in their pension policy, or transfer to an income drawdown plan and take benefits over time, Mr PcPhail said.

At the start of March Equitable Life revealed it was bringing in dozens of staff to respond to next month’s demand, following internal research finding thousands of customers are set to accelerate taking their benefits to coincide with the rule changes.

It is upping the customer service team’s headcount by 40, taking the total number to 240. Mr Wiscarson said that the firm wrote to all its policyholders in January because it had a good idea of what the pension reforms would look like.

Since then he said around 1,500 policyholders “who we would not have expected normally to take their benefits” responded stating they would like their benefits in April.

peter.walker@ft.com