Equitable Life criticised over letters to exiting clients

woolly_wombat

Equitable Life with-profits policyholders thinking of exiting prior to maturity may be interested in this:

http://www.ftadviser.com/2015/01/14/investments/equitable-life-criticised-over-letters-to-exiting-clients-wEUN5nuBOFUvhmtIrVfPlJ/article.html

Equitable Life has failed to communicate fairly and clearly to with profits policyholders who want to leave, Laurence Sanderson, financial consultant at Essex-based Sterling & Law, has claimed.

He referred to a letter dated 24 March 2014 and published on the society’s website, which outlined improvements to policies with an increase in capital distribution to 25 per cent and removed a 5 per cent exit charge when polices were cashed in early.

It also stated: “For each with profits policy, we look at its value as at 31 December 2013 and, for every £1000, we allocate an extra capital distribution of £250 to that value. At the point a policyholder leaves the society, we take the policy value plus the capital distribution, compare it with the policy’s guaranteed value and pay out the larger amount.”

However, Mr Sanderson has said the letter was “inadequate and confusing”, as some of his clients have not received the higher of the two amounts when they left the society.

Mr Sanderson said eight policyholders in the same pension scheme were quoted with transfer values - policy value plus capital distribution - that were lower than the guaranteed values.

He said: “The wording of the letter suggested that they would get the guaranteed values, which is the higher amount, but in reality they got the lower amount.”

According to one policyholder’s scheme benefit statement, the value of guaranteed benefits, as of November 2014, was £18,623 but the value available for transfer was £16,798, a difference of nearly £2000.

Mr Sanderson said he took this up with Equitable Life last year, which confirmed that these policyholders would get the lower value on leaving the society. He said Equitable Life told him the guaranteed value applied only on death or maturity, despite the letter in March 2014 simply stating “leaves the society”.

He said that while the member statement does state: “your transfer value may be significantly less than the guaranteed value”, this was not upfront information and seemingly contradicted what the March 2014 letter sent to policyholders stated.

Mr Sanderson said: “This is not in the spirit of treating customers fairly.”

Right to reply

A spokesman for Equitable Life said: “The annual benefit statement issued to members last May and the flyer provided to trustees for inclusion with the benefit statement were explicit on when the guarantees applied to members of this scheme. As the savings are being transferred prior to retirement and not on death, there is no guaranteed benefit. Last November, we were asked to provide transfer values, which we calculated in accordance with the policy rules, consistent with the benefit statements, which we reissued.”

Unfortunately this is the kind of 'smoke and mirrors' approach which some of us have come to expect from Equitable Life.

WW

woolly_wombat

I have just received a letter from Equitable Life, dated 13 January 2015, and I notice that a small but crucial additional phrase has been inserted in the Q & As on the back re capital distribution (highlighted):

Q
How does the 25% capital distribution work?

A
We look at the value of your with-profits policy as at 31/12/2013 and, for every £1000, we allocate an extra capital distribution of £250 to that value. At the point a policyholder leaves the Society, we take the policy value plus the capital distribution, compare it with the policy’s guaranteed value, where applicable, and pay out the larger amount.

So if you are tempted to flee Equitable Life before your with-profits policy matures at age 60, then don't be surprised if the transfer value is less than the guaranteed value.

WW