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  • FIRST POST
    • br1anstorm
    • By br1anstorm 7th Jun 17, 2:26 PM
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    br1anstorm
    Equitable Life - reduction in payouts?
    • #1
    • 7th Jun 17, 2:26 PM
    Equitable Life - reduction in payouts? 7th Jun 17 at 2:26 PM
    I have an Equitable Life with-profits AVC policy. Having retired some years ago, I am no longer paying contributions. I did not seek to take benefits as soon as I retired (partly because an MVA was then in force), but left the policy invested. I am now 67, ie well past my original or normal specified retirement date. I understand that I can now take the policy benefits (as cash or by purchasing an annuity), at any time I choose up to age 75.

    The latest valuation gives the "guaranteed benefits" at about £17,668, and the transfer value at £16,555. A note on the statement says that transfer value "includes an amount of £4292 which represents the share of capital allocated to your benefits and is payable when benefits are taken. This amount is not guaranteed and can go down as well as up".

    I have recently had a letter (from the AVC administrator) warning that in view of current economic and interest rate conditions, there is "... a very real possibility that the 35% capital distribution, payable at the time policyholders take benefits, [my underlining] may have to be suspended", and urges consulting an IFA (I don't currently have one...).

    I am puzzled. Does the threat of suspension of the 35% capital distribution only apply if I seek to transfer the policy-amount (ie the transfer-value could be only £16555-£4292, ie £12263)?

    Or would the capital-reduction of £4292 also apply if I sought to "take benefits", as I believe I am entitled to do, and in which case I has expected to get the full £17668 guaranteed amount, or possibly more?
    Last edited by br1anstorm; 07-06-2017 at 2:41 PM.
Page 1
    • xylophone
    • By xylophone 7th Jun 17, 3:16 PM
    • 21,617 Posts
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    xylophone
    • #2
    • 7th Jun 17, 3:16 PM
    • #2
    • 7th Jun 17, 3:16 PM
    http://www.equitable.co.uk/media/52501/policyholder-qa-final.pdf

    You've seen the above?
    • agarnett
    • By agarnett 7th Jun 17, 4:51 PM
    • 1,253 Posts
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    agarnett
    • #3
    • 7th Jun 17, 4:51 PM
    • #3
    • 7th Jun 17, 4:51 PM
    It is typical With-Profits actuary speak. As a group of so-called professionals, they are all acting (all the W-P actuaries at all the providers) like a cartel by collectively completely reneging on the original W-P concept.

    Basically they want you to scare you to leave the building whilst you still can and be grateful for your 35%, leaving the gold dust behind which someone (not you, unless you wish to gamble and stay) might be able to recover later.

    It is the same old same old final bonus ploy: "Due to the uncertain financial climate we can no longer guarantee W-P to be either a cautious, a conservative, or even a consistent investment even though that's how we all sold it to millions of punters over decades (all that used to be achieved by planning and smoothing and investment expertise, all of which we find distracts us from making money for our shareholders) and so we now give ourselves the luxury of turning on or off (at will) this girt big final bonus tap. So if you are thirsty or scared, then you'd better get in the queue before we turn it off again".

    W-P actuaries no longer want to work hard at safeguarding and smoothing returns to customers. They have other ideas to keep their bosses happy and earn their own pensions.

    So, not knowing for sure, but reading between the lines of what the OP copy typed from the letter, which exactly matches some text in the link to FAQs xylophone found, I'd say that's what it is.

    What did your end April 2017 Annual Statement say about the existence or otherwise of the 35%? In the FAQ published just 9 months ago they promised the end April 2017 Annual Statement would make it clear.

    If you have a quote now that clearly includes the 35% capital distribution then it appears it is still available. If there is no mention of it, then perhaps they've already turned off the tap. Using the figures so far given, it isn't possible to detect if it's been included or not?


    I have an enormous beef with Aviva who are doing much the same thing in their case completely without any published financial disaster having befallen the fund. They were obliged to add at least five thousand quid to one of my policies in 2015 but instead they unilaterally decided not to add it until I leave and to make it non-guaranteed.

    And they do it in the name of "fairness", like they are Gods Almighty.

    I don't care whether Equitable Life looks like a special case overseen by government or FCA, but their actuaries and all W-P actuaries seem to be constantly putting up smokescreens in order to have it away with our funds, claiming God and frequently the High Court, are on their side:
    Last edited by agarnett; 07-06-2017 at 4:54 PM.
    • woolly_wombat
    • By woolly_wombat 8th Jun 17, 10:32 AM
    • 467 Posts
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    woolly_wombat
    • #4
    • 8th Jun 17, 10:32 AM
    • #4
    • 8th Jun 17, 10:32 AM
    I have recently had a letter (from the AVC administrator) warning that in view of current economic and interest rate conditions, there is "... a very real possibility that the 35% capital distribution, payable at the time policyholders take benefits, [my underlining] may have to be suspended", and urges consulting an IFA (I don't currently have one...).
    Originally posted by br1anstorm
    That's odd. I received a copy of this letter a few months ago:
    http://www.equitable.co.uk/media/53451/final-jan-letter-vb3-17-1-17-uk-letter-1-website-version.pdf

    "31 January 2017

    Dear Policyholder

    I am pleased to say that we enter the New Year confident that we can maintain capital distribution at 35%
    ......"

    Does the threat of suspension of the 35% capital distribution only apply if I seek to transfer the policy-amount (ie the transfer-value could be only £16555-£4292, ie £12263)?

    Or would the capital-reduction of £4292 also apply if I sought to "take benefits", as I believe I am entitled to do, and in which case I has expected to get the full £17668 guaranteed amount, or possibly more?
    See page 15:
    http://www.equitable.co.uk/media/54154/ppfm-march-2017.pdf page 15:

    "8.2.3 Other Business Risks
    Other business risks which may affect the environment in which the Society operates are noted below. The list is not exhaustive, but aims to highlight the more important issues.

    a) Cost of guarantees
    For some of the Society’s policies, the guaranteed benefits will be higher than the Policy Value plus any Capital Distribution Amount at maturity. If this is the case, the higher guaranteed amount is payable.
    "

    No doubt your policy has a GIR (guaranteed investment rate) of 3.5% pa.

    However, as I'm sure you are aware, the 'guarantee' only applies on 'contractual termination' such as maturity, retirement, death or payment of an annuity.

    Therefore don't mention the 'T' word if you are thinking of leaving Equitable Life. Instead ensure you speak in terms 'immediate drawdown' to satisfy the retirement 'contractual termination'.
    Last edited by woolly_wombat; 08-06-2017 at 11:00 AM. Reason: Clarification
    • woolly_wombat
    • By woolly_wombat 8th Jun 17, 11:47 AM
    • 467 Posts
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    woolly_wombat
    • #5
    • 8th Jun 17, 11:47 AM
    • #5
    • 8th Jun 17, 11:47 AM
    There has previously been talk of the removal of 'valuable guarantees', i.e.GIRs (we lost the GARs long ago). See:
    http://www.telegraph.co.uk/finance/personalfinance/savings/9132308/Equitable-Life-moves-to-remove-valuable-guarantees-from-its-400000-with-profits-customers.html

    It hasn't happened yet but the latest Annual Report and Accounts does state that ELAS is "determined to distribute all of the Society's capital among with-profits policyholders as fairly and as soon as possible".

    I don't think many policyholders understand how valuable the GIR is and have been blinded by the 35% capital distribution.

    Some background: under the infamous 'compromise' deal back in the mists of time when Equitable Life realised they didn't have sufficient assets to satisfy with-profits guarantees, policyholders had the value of their policies reduced by 16% across the board. However, as a well-informed poster on the old Motley Fool forum (now sadly closed) pointed out, "many policies had a guaranteed value that was greater than the total value minus 16%", and "The ‘underlying’ value thus fell below the guaranteed value for these policies and it is this underlying value that is used for non-contractual events". See http://boards.fool.co.uk/elas-moves-to-remove-gir-12503331.aspx?sort=whole#12507661
    • br1anstorm
    • By br1anstorm 8th Jun 17, 6:47 PM
    • 178 Posts
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    br1anstorm
    • #6
    • 8th Jun 17, 6:47 PM
    • #6
    • 8th Jun 17, 6:47 PM
    Thanks to all for replies....

    The Sept 2016 Equitable press Q&A to which xylophone gave a link to seems to coincide with the letter I received from the CSAVC scheme administrators indicating that the 35% capital distribution might be suspended.

    But as woolly_wombat has mentioned, there appears to have been a more recent announcement (Jan/Feb 2017) that this was no longer likely or intended. I received no letter or update informing me of this. But it seems the immediate need to re-think whether to cash in or not has been removed.

    As for the actual value of my policy, it looks as if the g'teed value of £17k is higher than the transfer value of some £16k (which is the 'real' value of the policy plus some £4k as the 35% capital distribution).

    In any case as I am now over 60, and past the retirement age originally stipulated in my Equitable policy, it seems I am contractually entitled to take the benefits at any time I choose up to age 75 and would qualify to receive the guaranteed value whenever I did so. So it seems the threat of non-payment of capital distribution wouldn't affect me anyway....
    Last edited by br1anstorm; 08-06-2017 at 6:49 PM.
    • woolly_wombat
    • By woolly_wombat 9th Jun 17, 10:28 AM
    • 467 Posts
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    woolly_wombat
    • #7
    • 9th Jun 17, 10:28 AM
    • #7
    • 9th Jun 17, 10:28 AM

    As for the actual value of my policy, it looks as if the g'teed value of £17k is higher than the transfer value of some £16k (which is the 'real' value of the policy plus some £4k as the 35% capital distribution).
    Originally posted by br1anstorm
    The real value of your policy is the guaranteed £17K provided you satisfy the terms of the guarantee (i.e. the GIR) with reference to 'contractual termination'.

    Reading between the lines, however, I do wonder whether Equitable Life are once again angling to get rid of GIRs.

    Have a look at this, specifically p. 3:
    http://www.equitable.co.uk/media/51466/45j060-equitable-investment-fund-416-final.pdf

    "c) The cost of guarantees
    We need to have enough money to pay out at least the guaranteed amount described in each with-profits policy. In some circumstances, the guaranteed benefits in a policy are worth more than that policy’s fair return from the withprofits fund.
    "

    There's more in the latest Annual Report and Accounts if you care to wade through it (I have a hard copy). There is mention of "a trend towards people retiring later" and "risk for the Society in respect of GIR on RSP policies, which are typically 3.5% pa" and the costs of providing those guarantees in a low interest environment.
    http://www.equitable.co.uk/media/44691/report-and-accounts-2016.pdf
    Last edited by woolly_wombat; 09-06-2017 at 10:34 AM. Reason: Remove duplication
    • br1anstorm
    • By br1anstorm 10th Jun 17, 8:17 PM
    • 178 Posts
    • 56 Thanks
    br1anstorm
    • #8
    • 10th Jun 17, 8:17 PM
    • #8
    • 10th Jun 17, 8:17 PM
    Thanks again woolly-wombat. I think I'm beginning to get to grips with the situation, but it's still not totally clear.

    I was confused by the references to (and the risk of), suspension of capital distribution. I had thought that the capital distribution was comparable to the "final bonus" that with-profits policies traditionally paid out. It seems this is not quite the case. If I now read the documents correctly, the capital distribution is what would be added to the (basic) policy-value if you chose to transfer your policy-money early, or claim the benefits before your policy maturity date. That capital distribution is not guaranteed.

    Where a policy has guaranteed benefits, the Equitable guidance states that if you take the benefits "at a time the guarantee applies", Equitable will pay whichever is the higher of either the guaranteed value, or the (basic) policy-value plus the capital distribution (the % of which is decided by Equitable and may vary). If you take the benefits at a time when the guarantee does not apply, you only get the transfer value (which is the basic policy-value plus a capital distribution.... minus an MVR if the company has one in place, which Equitable does not at present).

    So much for the theory. In my specific case, the question now is - when does the guarantee apply? The basic facts are thus:
    • my documents state that my scheme's with-profits policy ".... has a guaranteed benefit which is the minimum amount payable on retirement at a time allowed under the policy, or on death" [my underlining];
    • my specified 'normal' retirement age of 60 (and thus the policy-maturity date) was in early 2010. It seems clear that if I had taken the benefits at that date, I would have collected the guaranteed value - whatever it was at that time;
    • In fact I chose to leave the (matured) policy invested. I had of course ceased making payments into it;
    • my latest annual statement says that the g'teed value of my policy is now some £17k, and that the transfer value is some £16k (with a note that this latter figure includes some £4k of capital distribution). So I deduce that my basic policy value is around £12k;
    • the guidance from both Equitable and the scheme administrator says that I can take the benefits at any time up to age 75;
    What is unclear from the guidance notes is what is meant by ".... at a time allowed under the policy....". In other words, when exactly does the guarantee apply? Only on the day of my retirement at 60? Or on certain selected subsequent dates? Or whenever - up to the age of 75 - I seek to take the benefits? And who decides on the applicability of the guarantee?


    I plan to ask Equitable these specific questions. But I'd be interested to see what other forum members think is the answer!
    Last edited by br1anstorm; 11-06-2017 at 12:06 AM. Reason: punctuation
    • woolly_wombat
    • By woolly_wombat 12th Jun 17, 12:24 PM
    • 467 Posts
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    woolly_wombat
    • #9
    • 12th Jun 17, 12:24 PM
    • #9
    • 12th Jun 17, 12:24 PM
    Please do keep us posted and let us know what Equitable Life have to say.

    Nothing is ever simple with ELAS.

    I happen to know that they are once again contacting 'focus groups' among current policyholders, hence the speculation regarding what they are planning to do next.
    • br1anstorm
    • By br1anstorm 15th Jun 17, 11:56 PM
    • 178 Posts
    • 56 Thanks
    br1anstorm
    Equitable Life AVC - restrictions and options
    Nothing is ever simple with ELAS.
    Originally posted by woolly_wombat
    That quote is spot on. The plot thickens. I started with what I thought was a simple question about whether and how Equitable paid out (or might suspend....) the 'capital distribution'.

    The more I try to seek clarification, the more complex the picture seems to become. Just to recap the key elements so far:
    • my (Civil Service) AVC policy with Equitable currently has a guaranteed value (£17k) higher than the current transfer value (£16k);
    • that transfer value includes some £4k of capital distribution;
    • My normal retirement date, and thus policy maturity, was in early 2010. I am now retired and receiving my main Civil Service pension;
    • I chose to leave the policy invested as I did not at that time need or see advantage to taking the benefits then, and believed it would grow in value and that I could take the benefits at any time thereafter;
    • but I am now looking at my options.
    I appear to have some choices. So I am trying to figure out what makes most sense and is most advantageous. So I wanted to clarify

    (a) when the 'guaranteed value' (GV) benefit is payable. The Equitable guidance says 'at a time allowed under the policy or on death'. This appears to be on retirement and/or when the policy matures (ie in my case 2010). I had understood that if I left the policy invested, I could take the benefits (and get the GV) at any time thereafter;

    (b) how I could take the benefits. I had understood that on or after maturity I could either take the policy value as a (lump sum) cash amount; or transfer it to another provider; or buy an annuity....

    I still await confirmation from Equitable as to exactly when the GV is payable (ie at any time beyond retirement/maturity?).

    Meanwhile I also sought clarification from the scheme administrators, MyCSP. Quoting the Equitable guidance that I could take benefits at any time up to age 75, and that the GV would apply "at a time allowed under the policy or on death" I asked them when and in what form I could take my Equitable AVC benefits, and exactly when the GV applied. To my slight surprise, they have said

    Unfortunately, there are restrictions on how you can claim your CSAVCS policy with Equitable Life. ...... Scottish Widows and Standard Life allow members to access their CSAVCS policy flexibly as a full cash lump sum however Equitable Life do not offer this option.
    .
    When I probed for more details on the restrictions, and on when the GV was payable, this was the answer I got:

    I can confirm that the rules with regarding to you being able to take your CSAVC policy with Equitable Life as a cash lump sum not being applied from 1/04/2015 was already in place before this date. Therefore, members with an Equitable Life CSAVC even before 01/04/2015 were not offering members with this option resulting in the options for you have never changed. This rule only changed from members with a Scottish Widows policy as Scottish Widows come to an agreement with [the Government] to get them the full cash lump sum option as of 1/4/2015. You are not restricted as such you just do not have the flexibility's to take you policy as a full cash lump sum as Equitable Life confirmed they were unable to provide this option for tax reasons. Your questions regarding the guaranteed value I have forwarded directly to Equitable Life to be answered.
    Hmmm. If that is so (and despite the grammatical errors I assume the substance of that answer is correct) then it would appear that I have only two options for "taking benefits".

    One is to transfer the value of my Equitable AVC to one of the other AVC providers (ScWids or StdLife) - in which case only the transfer value would apply, but thereafter I could, if I chose, draw some or all of the money out (to spend or invest in some other way....)

    The other is to use the value of my Equitable AVC to buy an annuity - in which case the GV would presumably apply, but the annuity would not amount to much?

    This has now rather overtaken my initial query as to whether - depending on when I chose to take the benefits - I might miss out on the capital distribution element.

    But I am now less clear about what is the most sensible course of action: leave it invested as-is, transfer to one of the other two providers, or buy an annuity now (or later)?
    • woolly_wombat
    • By woolly_wombat 16th Jun 17, 12:01 PM
    • 467 Posts
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    woolly_wombat
    it would appear that I have only two options for "taking benefits".

    One is to transfer the value of my Equitable AVC to one of the other AVC providers (ScWids or StdLife) - in which case only the transfer value would apply, but thereafter I could, if I chose, draw some or all of the money out (to spend or invest in some other way....)

    The other is to use the value of my Equitable AVC to buy an annuity - in which case the GV would presumably apply, but the annuity would not amount to much?
    Originally posted by br1anstorm
    I don't think that's the case.

    I remember a WP policholder reporting years ago that that they had avoided a lower transfer value (back in the days when an MVR applied) by telling Equitable Life that they wanted to immediately take their retirement benefits via drawdown. Of course that did entail moving the fund to another provider (ELAS does not offer drawdown) but they were careful not to talk in terms of 'transferring'. Once it's safely away then it's up to you how you choose to withdraw it.

    I'm afraid I haven't been able to find the link on the old Motley Fool boards, but it stuck in my mind. I thought it might come in handy one day.

    You could try speaking to someone at Hargreaves Lansdown.
    • woolly_wombat
    • By woolly_wombat 16th Jun 17, 12:04 PM
    • 467 Posts
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    woolly_wombat
    Of course you could just sit tight and do nothing.

    You could get an uplift if ELAS abolish the GIR.

    Who knows? Not me!
    • sarahemmm
    • By sarahemmm 21st Jun 17, 7:54 AM
    • 95 Posts
    • 82 Thanks
    sarahemmm
    I'm in (nearly) the same boat
    Have just read this thread with interest, as I have a small (~20k) Equitable Life pension which I paid into in the 90s. I stated that I expected to retire at 60 (last year), and changed that to 62 when they wrote to me. I do intend to retire next year, at 62.

    Does that sound as if I have fulfilled the requirements, or am I likely to lose my GV?
    • woolly_wombat
    • By woolly_wombat 21st Jun 17, 8:45 AM
    • 467 Posts
    • 273 Thanks
    woolly_wombat
    Have just read this thread with interest, as I have a small (~20k) Equitable Life pension which I paid into in the 90s. I stated that I expected to retire at 60 (last year), and changed that to 62 when they wrote to me. I do intend to retire next year, at 62.

    Does that sound as if I have fulfilled the requirements, or am I likely to lose my GV?
    Originally posted by sarahemmm
    More questions than answers I'm afraid:
    1. Does your GV exceed the transfer value?
    2. If yes, when did the GV overtake the transfer value?
    3. Assuming you do not want to take an annuity, have you asked ELAS about immediate drawdown?

    My WP pension policies date from the very late 80s and my transfer value is considerably higher than the 'nominal' GV.

    I shall reach my maturity date within the next 18 months. Until I get there I don't really trust that 'nominal' GV.

    Am I right to be suspicious?
    • woolly_wombat
    • By woolly_wombat 22nd Jun 17, 12:11 PM
    • 467 Posts
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    woolly_wombat
    Link to an old TMF forum where 'Cereboot' reports having transferred an AVC out of Equitable Life at retirement unreduced:

    "there would have a been a discount applied on a transfer if all the money would remain uninvested but since I would be immediately taking benefits in the SIIP the transfer was the "full" value...since Equitable do not offer drawdown".

    http://boards.fool.co.uk/tax-free-cash-and-avcs-12888927.aspx?sort=whole
    • neilvw
    • By neilvw 24th Jun 17, 12:20 AM
    • 437 Posts
    • 210 Thanks
    neilvw
    I can confirm that the rules with regarding to you being able to take your CSAVC policy with Equitable Life as a cash lump sum not being applied from 1/04/2015 was already in place before this date. Therefore, members with an Equitable Life CSAVC even before 01/04/2015 were not offering members with this option resulting in the options for you have never changed. This rule only changed from members with a Scottish Widows policy as Scottish Widows come to an agreement with [the Government] to get them the full cash lump sum option as of 1/4/2015. You are not restricted as such you just do not have the flexibility's to take you policy as a full cash lump sum as Equitable Life confirmed they were unable to provide this option for tax reasons. Your questions regarding the guaranteed value I have forwarded directly to Equitable Life to be answered.
    This refers, I think, only to taking the whole pot as cash.

    Probably the easiest way forward is to ask Equitable Life for a retirement quote (i.e. for taking an annuity with them - or rather with Canada Life, to whom they have farmed out their annuities), and a transfer-out quote. Compare the values you get and please let us know.
    • br1anstorm
    • By br1anstorm 24th Jun 17, 12:52 AM
    • 178 Posts
    • 56 Thanks
    br1anstorm
    an update of sorts - but still no clear info
    I'm still trying to get clear, straight, answers out of either Equitable Life (the provider) or MyCSP (the scheme administrator).

    It's like pulling teeth.

    The notes on my annual policy statement say,

    Your pension scheme's with-profits policy has a guaranteed benefit which is the minimum amount payable on retirement at a time allowed under the policy or on death”.

    It goes on to say that “If you take your benefits at a time when the guarantee applies, Equitable Life works out the amount it pays….etc”.

    So I thought I'd keep it simple and factual. I asked Equitable Life to state exactly when the guarantee applied, and sought confirmation that the GV was payable at - or at any time after - my retirement date which was of course the original policy-maturity date.

    This was the reply I got:

    "I am unable to answer your question specifically regarding your policy as I do not have authority to deal with you in this regard.

    I can give you a generic response as to when the guarantee would apply.


    As stated in the notes on your benefit statement, the guaranteed benefit is only available on specified events such as retirement and death."
    [my underlining].

    That takes us no further forward, since the time, date or circumstances when the guarantee applies are not specified.

    I am retired. But I am not dead (as far as I can tell....).

    So I have written back to the Equltable Life requesting a copy of the actual policy document ..... in the possibly vain hope that this might indeed specify the time(s) when the guaranteed value applies.
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