Legacy policyholders still with the pension company are due a windfall.
Pension company Equitable Life is set to shut down, 18 years after it almost collapsed.
So long as members agree to the move in a vote scheduled for 2019, the insurer will transfer all policies to Reliance Life and its with profits fund will be closed for good.
In 2000 Equitable Life was hit by a major financial scandal which caused it to almost collapse. It had failed to put enough money aside to pay for promised pension payouts. Since then the company has been closed to any new business.
Policyholders will forgo current policy guarantees, but they are set to benefit from a large windfall. A total of £1.8 billion will be added to roughly 261,000 policies, resulting in an average windfall of £6,900.
According to Danny Cox, chartered financial planner at Hargreaves Lansdown: ‘This is a wonderful windfall for Equitable Life policyholders, who now stand to pick up a nice bonus as the with profits fund and Equitable Life shut up shop for good. There’s still a bit of a wait, but the uplift is so substantial it’s well worth hanging on for.
‘The closure of the with profits fund and the end of the Society will draw a final line under the insurance society, almost two decades after the Equitable shut its doors to new business.’
What investors should do
Currently, Equitable Life policyholders receive either their guaranteed policy value or the current value plus an uplift of 35 per cent if they transfer or surrender their policy. That is set to increase significantly, to somewhere between 60 and 70 per cent by the end of 2019.
It makes sense, therefore, for policyholders to do nothing for now. According to Cox: ‘Investors who can hang on will now see significant enhancements to their policy values. For those who can afford to do so, it clearly makes sense to wait.’