Equitable Life with profits pension / takeover.

feet_up

Since the NHS are clearly not going to tell you what is going on, or consult policyholders I thought I would pass on the result of my 'chasing up' the policy manager in the Department of Health and Social care.

[FONT=&quot]"The Department of Health and Social Care is continuing to consider the issue and is taking advice from the Government Actuary’s Department (GAD) on the impact the Equitable proposal will have on members. GAD have been provided with individual policyholder information (redacted of personal information) to allow them to perform informed analysis of member benefits. It is our intention to vote for the option which provides the greatest benefit to the greatest proportion of members, and will vote ahead of the 30th October deadline.[/FONT]
[FONT=&quot]The decision and required next steps for members will be communicated following the deadline"[/FONT][FONT=&quot]
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[FONT=&quot]So now we know don't we.[/FONT]

[FONT=&quot]Hope this is of interest. It would be good to know how many votes the NHS has at its disposal.[/FONT]
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[FONT=&quot]Feet Up
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justaquickie

Hi,
I intend to vote against the proposal, but I’d certainly be interested in any insight or considerations that may sway me.

My strongest reservation is based on numbers given in my illustrative statement, which projects in 8 years I will be 15% better off than WP if higher rate returns, 15% better off than WP if medium rate returns, and 8% WORSE off than WP if lower rate returns. With 8 years to retirement and with other UL investments and pensions to balance, I would prefer cautious fund allocation with limited market exposure, which is contrary to what appears to be required to match the incumbent WP projections, despite the uplift.

In short, if I’d been offered a transfer under these terms - even with the same uplift - I wouldn’t have taken it, but stayed put. So, why should I vote for the proposal? (I do understand everybody’s circumstances are different.)

Appreciate any thoughts. Thank you.

pafpcg

feet_up wrote: »

[FONT=&quot] It would be good to know how many votes the NHS has at its disposal.[/FONT]

Only one!

Note:
1: Trustees of Group Schemes can place both a single "Yes" and "No" vote assuming the scheme members indicate both positive and negative preferences in whatever exercise the trustees undertake in surveying their members, but since NHS trustees don't seem to be bothering to ask, it'll just be the one "Yes" vote. I]See 46.3 on page 38 of Part B of the Explanatory Booklet[/I

2: For Vote Two, all votes will have a "vote value" depending on the value of the policy funds held with Equitable. Trustees of Group Schemes will be able to split the vote value of their vote in accordance with their scheme members' preferences. I]See 80.16a on page 58 of Part B of the Explanatory Booklet[/I.
Since the NHS scheme will cast just a "Yes" vote, all the vote value for the entire NHS scheme will count for the "Yes" column, which will rather dwarf the meagre "10" vote value of my partner's vote!

pafpcg

justaquickie wrote: »

I intend to vote against the proposal, but I’d certainly be interested in any insight or considerations that may sway me.

My strongest reservation is based on numbers given in my illustrative statement, which projects in 8 years I will be 15% better off than WP if higher rate returns, 15% better off than WP if medium rate returns, and 8% WORSE off than WP if lower rate returns. With 8 years to retirement and with other UL investments and pensions to balance, I would prefer cautious fund allocation with limited market exposure, which is contrary to what appears to be required to match the incumbent WP projections, despite the uplift.

The differences in your projected values for the two schemes over eight years have surprised me. The five-year projections for the value of my partner's fund all indicate higher values for the Proposed scheme (Utmost) over the existing with-profits scheme if the Proposal does not proceed (WP):

Higher rate: WP-£158k Utmost-£187k
Medium rate: WP-£134k Utmost-£159k
Lower rate.: WP-£114k Utmost-£137k

I wouldn't have expected the extra three years of lower growth rate to reverse the relative values to that extent. But I don't doubt that Equitable have tweaked the calculations to show the benefits of the Proposal in as favourable a light as possible.....

justaquickie

pafpcg wrote: »

The differences in your projected values for the two schemes over eight years have surprised me. The five-year projections for the value of my partner's fund all indicate higher values for the Proposed scheme (Utmost) over the existing with-profits scheme if the Proposal does not proceed (WP):

Higher rate: WP-£158k Utmost-£187k
Medium rate: WP-£134k Utmost-£159k
Lower rate.: WP-£114k Utmost-£137k

I wouldn't have expected the extra three years of lower growth rate to reverse the relative values to that extent. But I don't doubt that Equitable have tweaked the calculations to show the benefits of the Proposal in as favourable a light as possible.....

Many thanks for replying, pafpcg, and for sharing your partner's numbers. If, like yours, my deltas were all above 18%, the decision would be simpler. I, too, was surprised by my projected values (in 8 years):

Higher rate: WP-£29.1k Utmost-£33.3k (+14.4%)
Medium rate: WP-£22.5k Utmost-£25.8k (+14.6%)
Lower rate: WP-£21.9k Utmost-£20.3k (-7.3%)

The disparity with your numbers does make me wonder if the current provider's name may be somewhat disingenuous, and the proposed one even more so? I appreciate my fund size is modest, but are turkeys really expected to vote for Christmas?

pafpcg

justaquickie wrote: »

If, like yours, my deltas were all above 18%, the decision would be simpler. I, too, was surprised by my projected values (in 8 years):

Higher rate: WP-£29.1k Utmost-£33.3k (+14.4%)
Medium rate: WP-£22.5k Utmost-£25.8k (+14.6%)
Lower rate.: WP-£21.9k Utmost-£20.3k (-7.3%)

An interesting comparison!

I don't know for certain what formula and growth-rate factors which Equitable have used to calculate the projections in each policyholder's illustration but I would expect that the comparison between the existing with-profits (WP) and the proposed scheme (Utmost) to be consistent, varying only due to the differing growth-rates for higher, medium & lower. My expectation would be that the percentage differences between WP and Utmost would be identical no matter what the size of the actual fund. The other unknown variable is the Utmost fund allocation - it varies with policyholder age moving towards more cautious funds with increasing age (which makes direct comparison of projected values between individual policyholders less reliable).

I find it difficult to explain why your lower-rate comparison goes negative - just looking at the pattern of your numbers makes me wonder why your lower-rate WP figure is so high - it's only £0.6k less over eight years than the medium-rate WP figure! Could it be because the WP's guaranteed 3.5% growth-rate is preventing the WP fund from losing value in comparison with the non-guaranteed Utmost fund? But then why isn't there a similar effect on my partner's lower-rate comparison? I do know that the guarantee has a value for policyholders who have many years before taking their pension benefits.

Anyone else prepared to share their projection figures in the nine days left before we have to submit our votes?

Maffo65

pafpcg wrote: »

Anyone else prepared to share their projection figures in the nine days left before we have to submit our votes?

Mine are in line with your partner's in relative terms (though the totals are smaller), and were calculated using interest rates of 3.3%, 1.3% and -0.7% p.a. respectively, over a ≈ 5.5 year period.

I'm assuming the same hypothetical rates were used for everyone?

[Deleted User]

We are missing the wood for the trees. Projections are a direct function of an assumed growth rate, are a crapshoot and sometimes confuse people more than anything. Focusing on a bunch of made up numbers ought not be the main driver.

To me, it comes down to this:

1. If you get the fallout and invest in stocks or a combination of stocks and bonds, you will be significantly better off unless you have little time left before you need the money and there is a market crash. Long term stocks give much better return than the “guarantee”.

2. If you get the fallout and invest in cash-like fixed income, you will be better off unless you have a really long time horizon. Bonds may or may not provide better return than the guarantee. Even if not, it will take decades before the added value of the fallout is eroded as a result of this lower growth.

Last but not least... What happens to the guarantee if/when EL goes bankrupt?

Scot_39

Thanks for making us aware of the update. A few potential pros / cons - depending on your position - have come from the recent Supplementary Report - bits are definitely worth reviewing. On the down side

"I note that as at the date of this Supplementary Report, the Society’s SCR solvency coverage is lower compared with 31 December 2018, mainly due to lower interest rates..."

The main take from the update is he still thinks things are fair - but due to changes in interest rates since Dec 18 calc assumptions.

"The current estimates show that the Primary Uplift is slightly higher than the 72% of Policy Values at 31 December 2018 (and higher than the illustration uplift of 68%)."

However, despite EL "adjusting it's deriviative holdings", the report still has to admit that 72% is not fixed - and so give the updated range quoted by pafpcg above:

"The Primary Uplift is currently expected to be within the range of 65% -75%"

However - at least this is a positive change - and the new expected bottom end at 65% - although still not guaranteed - is close to the personal illustration values.

The information on secondary uplifts is less explicit - the calculation date has come and gone - 30 Sep - they have the numbers "fixed" - but not disclosing - but on the face of it also encouraging - at least for some - as the allocation has increased.

"A decrease in interest rates will make Investment Guarantees more valuable, and this is reflected in the uplifts calculated via the Secondary Uplift"
"The total cost of the Secondary Uplift has increased from c£100 million at 31 December 2018 and it is expected to be c10% of the assets available for distribution."

Suggesting as well as primary - the secondary should go up for at least some - but then cautions that the primary increase impacts some of the fairness tests - so guess risk some members might lose some of their secondary when get the predicted 4% or so primary uplift boost.
If they have new secondary bands / figures - cannot see why they don't release them - even with the normal not guaranteed caveats - wouldn't higher numbers help them sell the scheme.
For me - the revised range and figures - provides at least a reassurance that the illustrations should be a good indication of what we are likely to get - possibly an underestimate if anything - if the scheme goes ahead in three months time.

One other point that could have been missed above - which may adversely impact personal illustrations for ELWP stay figures - if done the same as my own - which were done with a 55% capital distribution - but as a result of the lower interest rates impacting forward projections - the expert notes

"Lower solvency coverage serves to delay the increases in the projected CEF"
"I would expect that the Extent Better Off results may increase at shorter durations overall due to a lower projected CEF, and reduce at longer durations as the tontine effect comes into effect (higher later releases of CEF)"

allgreek

I'm 66 in December this year and the projections are for age 71.

My calculations show interest rates used for the Utmost projections of: Higher 2.91%, Medium -0.41% and Lower -3.24%. The values for everything are lower in the projection than the starting value unless the Higher rate is achieved.

For the With-profits projections the values at the end of 5 years are all higher, but only slightly unless the Higher rate is achieved. The effective rates are: Higher 3.95%, Medium 0.79% and Lower 0.06% (this is the guaranteed value as it would be higher than the projected value).

I think the sensible answer for me is to agree to the proposal and then take the money as soon as possible after the Uplift is applied. I have some tax problems with that and I am also concerned that Utmost will put obstacles in the way of getting money out. I do not trust financial organisations.