Help! Early Equitable Life Pension

tony4563

I worked for a private hospital back in the 80's and paid a small pension amount every month to Equitable Life for about 3 years. I eventually moved on to another job in the NHS and basically forgot about this small pension. I did however contact them about four years ago to update my address details, and I was sent a wind up policy with a pension forecast at retirement age. Again, because I was only in my early 40's I just kept it safe and to one side, hopefully contacting them again in later years to get whatever small pension I was owed when I retired (I'm hoping to retire at 55)

It was with interest that I read in the paper about the Equitable Life compensation payouts, but only to people who had paid AFTER 1st September 1992.

What's happening with the policies like mine, taken before then?
Can these be cashed in early or do I have to wait the duration till I'm 55, 60 or older?

Is Equitable Life even still operating as a company and am I still likely to receive pension payments when I retire?

Any advise welcome!

woolly_wombat

tony4563 wrote: »

I worked for a private hospital back in the 80's and paid a small pension amount every month to Equitable Life for about 3 years. I eventually moved on to another job in the NHS and basically forgot about this small pension. I did however contact them about four years ago to update my address details, and I was sent a wind up policy with a pension forecast at retirement age. Again, because I was only in my early 40's I just kept it safe and to one side, hopefully contacting them again in later years to get whatever small pension I was owed when I retired (I'm hoping to retire at 55)

It's a good idea to request a statement from each former employer on a regular basis. Write to them each year to request a forecast.

It was with interest that I read in the paper about the Equitable Life compensation payouts, but only to people who had paid AFTER 1st September 1992.

What's happening with the policies like mine, taken before then?
Can these be cashed in early or do I have to wait the duration till I'm 55, 60 or older?

Was it a so-called 'with-profits' policy? If so it probably comes with a GIR (guaranteed investment return). Transferring before the contract end date (typically at age 60) could incur a penalty in the form of an MVA (market value adjustment). See:

https://group.equitable.co.uk/etg/elas/groupmarket.nsf/web+pages/pdflib/$file/InvestFunds05.08.pdf

Extracts:
"Many of our policies have a guarantee where we promise to pay a minimum rate of return (typically 3.5% a year) on the invested part of the premiums paid. A guaranteed investment return is only payable when the guaranteed benefits are paid. You will need to look at your own policy to see if this applies to you."

"When you cash in your policy early or transfer it, we currently apply a financial adjustment to your policy value so that the amount we pay out does not harm the financial position of the other policyholders (while still paying you a fair amount).
In these circumstances, the guaranteed minimum benefit under the policy does not apply."

Is Equitable Life even still operating as a company and am I still likely to receive pension payments when I retire?

Yes.
http://www.equitable.co.uk

WW

tony4563

Thanks for that woolly!

Will ring for an update.

tony4563

OK.. Got a forecast on my (very) small pension.... I wasn't in it for long.

I'm 50 years of age and still working. My options offered are..

A. Wait till I'm 65 in 2028 and draw £120 a month gross

B. Take the pension now at £60 per month gross

C. Tax free lump sum of £3560 and £45 per month gross now

I'm really tempted with option C and to take the money and run, after all that's happened at Equitable Life recently.

What do you guys think?

PS.. Its a non profit policy.

bigadaj

Is the pension indexed or flat rate as that will make a huge difference.

Commutation rate, the lump sum is a commutation rate of around 20 so fairly poor but not terrible.

Something to think about is your current situation, are you still working and for how long, and what rate of tax do you currently pay, taking this now and paying higher rate tax would mean losing nearly half immediately.

tony4563

Thanks for your reply bigadaj.
Flat rate as far as I know. Still working but hoping to call it a day in 2.5 years. Gonna live off savings till work pension is drawn at 60. Higher tax rate at the moment but only because I work a fair bit of overtime to fill the savings pot for retirement. (basic salary is 29k)

bigadaj

If there's no inflation linking then I'd be tempted to go with your initial thoughts and option c. As a bird in the hand....

What pension do you have currently, as I'd be tempted to direct this money into that pension if you can whilst you can afford it and get the tax relief from your current earnings. If it's defined benefit, then can you buy added years or if defined contribution then contribute more and gain from the tax relief and salary sacrifice if available.

tony4563

I've an NHS final salary pension... Could only transfer old pensions within the first year of membership.

No worries. Thanks again mate

bigadaj

Fair enough, there's of course nothing stopping you setting up a personal pension yourself and paying into this to get tax relief, though you'd have to claim it back through self assessment.