Failed insurer Equitable Life has closed a number of its funds and dramatically hiked its fees on a number of unit-linked savings products.
From 1 April, the life company increased its annual charges in a move affecting 77,000 individuals out of 600,000 policyholders on Equitable Life’s books.
Cash savers in the Deposit fund will be hardest hit, as their savings are transferred into the Money fund, meaning they will have to pay a fresh annual charge of 0.5 per cent, up from the previous fee of 0 per cent.
The world’s oldest mutual insurer, Equitable Life went bust in December 2000 after it promised fixed returns and failed to put emergency provision in place to counteract falling interest rates.
Unable to find a buyer, the firm subsequently reduced payouts to its members.
According to a spokesman for Equitable Life, the company had to increase charges because the cash in its funds has been reducing as its policies mature and the insurer closes down.
He also said tough market conditions drove the firm to increase its prices, having not raised its fees in two decades.
At the end of 2015, the company closed to new claims, and gave savers a one month window from the date of their payment letter to lodge a complaint.
In November, policyholders with Equitable Life were compensated a total of £1.08bn, however, 125,000 policyholders still had not received any payment.
Money from some funds has moved into others as Equitable Life continues to shrink its business.
New funds were chosen based on them being the closest match to those shutting down.
In August, those invested in Special Situations, Smaller Companies and High Income funds - which has a 0.5 per cent charge - will shift across to the Pelican Fund which charges 0.75 per cent annually.
Similarly, the Managed fund will now hold cash from Clerical Medical Adventurous, Balanced or Cautious funds, meaning the fee will jump to 0.75 per cent from 0.5 per cent.
The spokesman added: “We have listened to our unit-linked policyholders and informed them of the situation.”
He could not confirm how many funds were closing.
Savers who want to switch to a different provider will not be charged an exit fee.
Tony Catt, compliance officer for Peacehaven-based Anthony Catt Limited said the increase in fees is hard on those policyholders who are still with the company.
“Many of the remaining policyholders are unlikely to move their funds and will stay until maturity. They will simply have to pay the extra charges and accept the lower returns.
“As the advert went, life is not always equitable, Henry.”