Equitable Life and EU probe

dazman_3

Hi, I’m currently looking into options on Equitable life for my parents. It seems they have both Unit linked and With profits products.

As I understand from reading a previous thread on this, the only issue with the ‘Unit linked' product is that the stock market went down. As it’s now higher than it was before the early 2000 drop, I would assume their funds now pretty much reflect this. It seems they are free to transfer without penalty to any of the stakeholder pensions reviewed on this site.

I’ve also seen that on the ‘With profits’ product they will be charged 11% if they move to another product. As a percentage, does anyone know how these products are doing in respect to their value 5 years ago? If they are anywhere near the same level, is it a good option to take the hit and hope to recover the charge in another product (assume 11% could be recouped over 1-2 years)?

Finally I believe there is an EU probe going on at the moment. From the comments I’ve seen on other sites it doesn’t seem like anyone is holding their breaths for a positive outcome – If there is a ruling on any compensation, is it likely that people that have since moved would be eligible?

Lots of questions I know – I would be glad of any help here!

dunstonh

As I understand from reading a previous thread on this, the only issue with the ‘Unit linked' product is that the stock market went down. As it’s now higher than it was before the early 2000 drop, I would assume their funds now pretty much reflect this. It seems they are free to transfer without penalty to any of the stakeholder pensions reviewed on this site.

There is no problem with unit linked plans. It should also not be assumed that the existing unit linked plans are not as good as current alternatives. This site also does not review or recommend any pensions. Some of the providers used as examples in the pensions article are beaten by other providers. They are just examples to stick a name in the box.

I’ve also seen that on the ‘With profits’ product they will be charged 11% if they move to another product. As a percentage, does anyone know how these products are doing in respect to their value 5 years ago? If they are anywhere near the same level, is it a good option to take the hit and hope to recover the charge in another product (assume 11% could be recouped over 1-2 years)?

The penalties are coming down but the long term potential on the EL WP fund is limited. The differences in potential would depend on your parents risk profile (leading to where and how they would re-invest elsewhere), the quality of the fund portfolio of the alternatives (if stakeholder, that would be fairly limited) and the time left until commencement of benefits.

Finally I believe there is an EU probe going on at the moment. From the comments I’ve seen on other sites it doesn’t seem like anyone is holding their breaths for a positive outcome – If there is a ruling on any compensation, is it likely that people that have since moved would be eligible?

Who knows? anything is possible. Personally, I don't see anything positive coming out of it.

EdInvestor

It is advisable to move unit-linked plans because there is no guarantee they would not get caught up in the problems that would ensue if Equitable went into administration. It is silly to take the risk.

You should check the exit penalty - it has gone down for most policies to 8% which provides a good opportunity to leave.

Most Equitable WP policies are in one of two categories:

a)Those that have a 3.5% guaranteed return on investment.These policies increase annually by (you've guessed it) 3.5%

b)Those which don't have a GIR which don't increase.

However without knowing more details we can't offer any real suggestions.

Impossible to say whether the EU ( or Parliamentary Ombudsman) inquiries will generate any compensation. There are various people eligible for other types of compensation as well, via the FOS and the FSA, depending on the product.

dazman_3

Thanks guys - I get the impression moving in both cases is the thing to do.

dunstonh

It probably would be. In the case of the unit linked funds though, I would just want to get those charges confirmed first. A comparative projection from new provider on the unit linked transfer value compared against a projection from EL on the unit linked current value should tell you most of what you need to know. i.e. the highest value at the same growth rate has the lowest charges.

It's the first thing to check on any transfer as it highlights all the costs of the transfer.

EdInvestor

Changes coming along to pensions, including AVCs and contracted out (protected rights) pensions in April could also affect the decision, you should check them too.