AVCs with Equitable Life - to move or not?

br1anstorm

In a nutshell, what is the outlook for "with-profits" investments with Equitable Life?

Key facts of my situation are as follows. Some years ago, while working as a civil servant, I opted to make AVC contributions under the schemes offered within the Civil Service pensions scheme. The providers approved at the time were Scottish Widows and Equitable Life (hah!). I chose the latter. [There's still a big question to be asked about the governments's due diligence and culpability in recommending Equitable as a CSAVC provider, but I fear that's water under the bridge.]

My AVC contributions were split 50/50 between Equitable Life's unit-linked and with-profits funds. When Equitable went pear-shaped I ceased making further contributions. A year or two later I transferred the unit-linked holdings (about £12k) to ScWids and Standard Life. I left the with-profits (another £12k) with Equitable, mainly because of the 11% - at the time - MVA penalty on transfer of WP funds.

Since then the MVA has gone down to 8%, and Equitable is reorganising/selling some of its assets and shrinking (if not withering....). Meanwhile I have retired - at age 57, 3 years ahead of official CS retirement age of 60. The AVC maturity date is 2010.

It appears that under the Equitable WP AVC scheme a Guaranteed Interest Rate of 3.5% pa applies to the guaranteed value (?) of my policy; and a variable non-guaranteed bonus is also payable.

The question is - what if anything should I do, now or later, with my £12k in WP funds sitting with Equitable Life? I do not need, or want, to cash in or access the funds now, and probably not immediately on maturity. I'd welcome advice on one or two points:

i) are WP investments left with Equitable safe or at risk? (ie is Equitable likely to go into terminal decline or collapse?)

ii) so, should I leave the £12k WP holdings where they are, and hope for at least 'average' growth until I can collect the maturity value with interest/bonus and without penalty in 2010? or

iii) should I take the 8% hit (3 years short of maturity) and transfer the funds elsewhere? And if so, where - one of the other CSAVC providers?

iv) if I leave the £12k with Equitable until maturity in 2010 (or come to that if I move it elsewhere) what can, or should I do at that point with the CSAVC money (the £12k WP currently with Equitable, and the £12k unit-linked with ScWids and Std Life)?

Originally I believe one had no option but to buy an annuity with AVC funds on maturity. Post A-day, I understand there is a wider range of options. I am disinclined to leave the £12k in Equitable WP funds beyond 2010 anyway. But - if I don't immediately need additional income to supplement my main pension - what are my options?

I wait with bated breath for comments/advice!

br1anstorm

EdInvestor

br1anstorm wrote: »

[There's still a big question to be asked about the governments's due diligence and culpability in recommending Equitable as a CSAVC provider, but I fear that's water under the bridge.]

Quite agree: blame the consulting actuaries.

Since then the MVA has gone down to 8%, and Equitable is reorganising/selling some of its assets and shrinking (if not withering....).

Yes, it has now got rid of ordinary and WP annuitants, so AVCs and protected rights pensions probably make up the bulk of the remainer.It seems likely theis rum will be sold off too.

Meanwhile I have retired - at age 57, 3 years ahead of official CS retirement age of 60. The AVC maturity date is 2010.

AVCs are normally attached to scheme pensions.Having taken the one, can you take the other if you want to (with or without penalty)

i) are WP investments left with Equitable safe or at risk? (ie is Equitable likely to go into terminal decline or collapse?)

The risk of collapse is less than it was: but I wouldn't bet it will be with us for much longer, I'd have thought your policy will be sold off to someone else quite soon.

ii) so, should I leave the £12k WP holdings where they are, and hope for at least 'average' growth until I can collect the maturity value with interest/bonus and without penalty in 2010?

Don't expect any more than the GIR of 3.5%.What has been the performance of the other money which you transferred earlier?

or

iii) should I take the 8% hit (3 years short of maturity) and transfer the funds elsewhere? And if so, where - one of the other CSAVC providers?

Ask the main pension scheme what you are allowed to do with the money.

Post A-day, I understand there is a wider range of options.

Not necessarily it depends on the scheme.

As a general observation, if you don't immediately need the money, you might as well move it somewhere where it has a chance of decent growth, eg perhaps your other AVC provider?

br1anstorm

EdInvestor wrote: »

AVCs are normally attached to scheme pensions.Having taken the one, can you take the other if you want to (with or without penalty)
...

What has been the performance of the other money which you transferred earlier?
...
[options other than annuity purchase following A-day]
Not necessarily it depends on the scheme.

In fact I've taken an early retirement package ("compensation") and I will only start receiving my 'normal' pension at age 60. So I guess that's when I have to decide what to do with my AVCs. The only immediate question is whether - in the meantime - to shift them from Equitable to another firm.

On performance of my 'other' AVC holdings, I haven't done the detailed maths, but £15k in 2005 grew to £18.5k by 2006...

As for A-day, the Civil Service scheme guidance says the rules will change after A-day, and "you can take up to 25% as lump sum, provided you draw your CSAVC benefits before your 75th birthday". Not sure quite what that means!

So I continue to ponder...

br1anstorm

pefwin

br1anstorm wrote: »

As for A-day, the Civil Service scheme guidance says the rules will change after A-day, and "you can take up to 25% as lump sum, provided you draw your CSAVC benefits before your 75th birthday". Not sure quite what that means!

This is correct you can now take a pension commencement lump sum (PCLS) from AVC funds (you could not take any new AVC's in cash post 8/04/1987). I think you will find the maximum age you can defer retirement to is age 75; hence the reference.