Equitable Life with profits pension / takeover.

dawne300

It is such a minefield.... do I vote against the payout which means if enough members do also then EL have to continue as they are (with guarantee profits.... can't remember their exact terminology). Or do I vote to accept the payout but then my money is used for 'trading' and is higher risk, and I have no guarantees. I'd like to stay and reap the benefits of the payout and then (at earliest chance) move my money somewhere else so it will be safer.

POPPYOSCAR

dawne300 wrote: »

It is such a minefield.... do I vote against the payout which means if enough members do also then EL have to continue as they are (with guarantee profits.... can't remember their exact terminology). Or do I vote to accept the payout but then my money is used for 'trading' and is higher risk, and I have no guarantees. I'd like to stay and reap the benefits of the payout and then (at earliest chance) move my money somewhere else so it will be safer.

Yes it is a minefield.

The helpline do not seem to know what they are advising!

I was told that that the transfer would take place on 1st Jan. but may be the next day as it is a bank holiday.

And that I would be able to take my money out on that day.

They did not say that the uplift would not be added at the date of transfer.

APort

It seems to me, that your EL ‘with-profits policy value’ is not the real value of your policy - as a member, that should also include your share of the capital reserve - and once that’s taken into account, probably your annual growth on the whole lot is in fact less than 3.5% (is there any way to calculate this?)

archer123

I was wavering. I've now decided to go with the offer. A guaranteed uplift, whilst the offer is on the table, vs potential guaranteed 3.5% growth that may, or may not, be sustainable.

I also think I will stay wholly, or at least partially, invested in Utmost for a while. The fund managers have a good track record, and Utmost have stated they will introduce a drawdown option.

It's fingers crossed time, as NO-ONE knows the real answer.

Scot_39

dawne300 wrote: »

It is such a minefield.... do I vote against the payout which means if enough members do also then EL have to continue as they are (with guarantee profits.... can't remember their exact terminology). Or do I vote to accept the payout but then my money is used for 'trading' and is higher risk, and I have no guarantees. I'd like to stay and reap the benefits of the payout and then (at earliest chance) move my money somewhere else so it will be safer.

Not sure I understand your last sentence - but agree with your first - it is a minefield.
To me you cannot "stay" with EL and "reap the benefits of the payout".

You only get the uplift / payout - assuming you mean the indicative uplift based figures - in the "after the proposal" box on your personal illustration - if the scheme goes ahead.
You seem concerned about the money being traded - so what you could do is vote for the scheme - and if it is approved - choose to have the uplifted total - the "potential unit linked value" on your personal illustration - paid into the "secure cash fund" with Utmost, and then transfer it out of Utmost.
Provided actioned within 6 months - with no costs, no risk of loss - you get the full amount out - guaranteed as part of the deal.

If the scheme is voted down - everything goes back to normal
Forget the uplift figures - they are meaningless.
The derivitive protection is taken away from the fund - exposing it more to market forces - for good or bad.

If the scheme is approved - you loose EL special terms - like the potential benefit offered by guaranteed investment returns in the future - in order to get the higher uplift payment now.
You have a choice of Utmost - and a mix of equity, mixed or bond/gilts etc - but expect you are looking to tranfer out - e.g. via the secure cash fund route suggested above.


Make your decision - only a few days left - and vote the way you are minded to - to suit your situation.

pafpcg

APort wrote: »

It seems to me, that your EL ‘with-profits policy value’ is not the real value of your policy - as a member, that should also include your share of the capital reserve - and once that’s taken into account, probably your annual growth on the whole lot is in fact less than 3.5% (is there any way to calculate this?)

You're right, the funds we would receive if we were to "cash-in" or transfer-out a with-profits fund do not necessarily rise by 3.5% per year.

My (very limited) understanding of the current scheme is:

The promise of an annual increase of 3.5% applies only to the "guaranteed value" of the policyholder's fund. When the policy is terminated, then a capital distribution (currently 35%) is added to the "policy value", but I don't think this is the "guaranteed value". The Equitable website says this for the bonus values: "The capital distribution is 35% of policy values at 31 December 2014". (www.equitable.co.uk/with-profits-fund/bonus-rates/). The website page gives a table of the rates of increase for with-profits pensions as 2% per annum and the 2019 Chairman's Statement says:

Increases to policy values
As with capital distribution, we have considered whether to maintain the 2% increase to policy values from the with-profits invested assets. While the actual return is much less than this, it has been higher in the past. One of the features of a with-profits fund is to smooth such returns over time, based on the long-term sustainable rate of return. The Board, therefore, is pleased to increase policy values by 2% for 2018 for UK with-profits pension policies.

So, subject to any policy changes in the bonus rate and the capital distribution, the effective rate of increase is 2% per year. Looking at the spreadsheet for the transfer value in my partner's annual statements, it's been 2% for the last four years.

Maffo65

pafpcg wrote: »

Looking at the spreadsheet for the transfer value in my partner's annual statements, it's been 2% for the last four years.

Same here: 2% for the last four years, not 3.5%.
One more reason to vore in favour of the Proposal, IMO.

There will be no penalty to transfer out of Utmost for at least a year anyway, we covered that upthread.
So folks who are not comfortable with them can switch to the provider of their choice.

McMooshie

Hi there

I am looking for some advice on an old Equitable Life pension I have from back in 1999/2000.

It is a unit-linked pension which unfortunately (as far as I know) doesn’t qualify for any compensation through the court case.

I haven’t paid into it for many years, but there is around 9-10K in the pot and I wondered what my options are with this as I know that they are looking to sell the pensions to Reliance Life.

Do I have to transfer to them? Can I cash this out if the sale goes through?

I haven’t had any information from EL on this as I cannot vote on the sale because my pension is not with-profits.

(I am 41 so quite a few years away from retirement!)

Scot_39

I have agonised over this decision for many hours / days / weeks since the launch - and still not sure I have done the right thing - as I voted on-line about 3 AM this morning - after yet aother evening re-reading booklets, annual reports etc.
I am not trying to impose my thoughts - I suspect my concerns will not apply to many here - but as others have been posting there conclusions - thought I would share mine.

My decision to vote for the scheme is based on a perhaps pessimistic view of the future of EL - but my concerns lie in the longer term - not in the immediate future - so will not apply to all.
I suspect whilst I am not the youngest member - I am almost certainly in the minority - with > 10 years to state age. So for me long term sustainability of ELWP is a key factor in the decison. But is impossible for anyone - let alone me - to predict risks against reserves etc - so fall back on "viable to at least 2026" - and threat of a "scheme mark 2" in "five to ten years".
The secondary uplift table 28.2 in booklet B - indicates potential longevity issues as well. The bottom 2 rows cover 58% members / 68% of value and above my row - the top 2 secondary uplift band rows - only 11% members / and more importantly only 3% value. To me this suggests a "massive" pending drop in head count and even more so fund value - is looming - to a potentially unsustainable size.

Whilst I am not happy to lose the GIR safety net promise - I cannot convince myself that ELWP can survive long enough without major changes - even if it can support the figures. I suspect even if I were to have voted to stay - my plans would be disrupted by some future EL "scheme 2" in any case - so getting out now - with the extra cash "in-hand" - may simply be as good a time as any.

So my decision comes down to the following

1) Ultimately the EL WP scheme probably has a finite life span - with the "inevitable end" as the chairman said in 2018 - coming too soon for me. If this is true

1.1) it is better to sell out of the current investments - gilts/ bonds etc - whilst they still hold a premium value.
1.2) it is better to re-start elsewhere now than in a few years time - giving younger members more time to ride out equity market volatility to get returns elsewhere to make up for the poor secondary uplift allocation.
1.3) any future "scheme mark 2" negotiation in the future - on the back of a reduced scheme size - could actually end up a much poorer deal.

2) The uplift is "guaranteed" money now - the GIRs, forecasts etc - are uncertain promises based on assumptions.

2.1) Taking the large uplift now on my fund - in 6 figures after uplift - is a very large sum of cash so gives me options including bringing retirement or more likely going part time by a few years
2.2) the uplift should cover a reasonable investment risk profile - to seek real growth elsewhere.
I am yet to decide if Utmost is a hop or my choice for investment - but the EL section scheme looks credible.
2.3) For me it would take near 10 years for the GIR to match my uplift - too long to be sure it will happen.

It remains to be seen if the scheme will go ahead (by no means convinced it will get the 75% support required)

Whatever way you vote - I wish you all well - and thank you for your thoughts.

Scot_39

APort wrote: »

It seems to me, that your EL ‘with-profits policy value’ is not the real value of your policy - as a member, that should also include your share of the capital reserve - and once that’s taken into account, probably your annual growth on the whole lot is in fact less than 3.5% (is there any way to calculate this?)

I am no expert - but some thoughts / observations - and to some extent confusion over exactly what you are asking.


Returns

Smoothed bonus rate - 2% since 2011 - applies to your policy values.
A history of the values can be found on the EL site - near the end of document - page 18 table(*)

https://www.equitable.co.uk/media/60831/ppfm-april-2019-website.pdf

This is the number behind the growth on our annual statements - but curiously - having just looked at my last one - doesn't appear to appear on them explicitly - whereas the 3.5% does.

By 3.5% I assume you mean the Gauranteed Investment Return (GIR).
The GIR is intended to provide a minimum return.

This applies to your current guaranteed level - not linked to your policy value or market rates.

The guaranteed minimum grows regardless of asset performance.

For simplicity - you could think of it as fixed rate savings bond maturing at retirement- at which point it's value is compared to your policy value - and you get the maximum of the two.

I suspect it was never expected to pay out - the assumption would have been that returns would have stayed higher - and the policy values would dwarf the GIR rate.

Actual Asset Investment Returns

Only place I can find this is the annual reports.

And have 2 returns to worry about - not just one - I think - the investment return and the (underlying ?) fund performance.
So in 2018 report - as JohnWinder said above - they quoted 0.5% as the investment return.

But not a simple single number - as EL have two rates to track. So the investment return this 0.5% was after a -0.7% value offset for the impact of interest rate based swings to gilt prices - so they put this back in - so that the actual fund performance was 1.2% - in both cases before the AMC.



So over the last three years - starting with the above 2018 numbers
For 2018 - numbers were 0.5, -0.7 offset so 1.2 - before the 1.5% AMC - so -0.3% ?
For 2017 - numbers were 1.0, -0.8 offset so 1.8 - before the 1.5% AMC - so 0.3% ?
For 2016 - numbers were 10.6, 8.5 offset so 2.1 - before the 1.5% AMC - so 0.6% ?



I struggle more than a little with this but as far as can tell - and I could be wrong - really wrong - but my simplistic interpretation of the two rates.

The 0.5% is then the guide to the total asset price return - important if buying or selling - e.g. to Utmost
The 1.2% is the fund performance if don't sell - e.g. hold gilts to maturity etc. - so used in long term projections of solvency and for setting bonus rates etc.

In fact the situation is even more complex - because equitable life - actually use a historically biased "underlying fund performance" that they say is 2% after charges - so 3.5% for the last few years - to justify the 2% smoothed bonus rate above.
The description says something along the lines more based on rates at the time contributions were made rather than current annual rates. I can understand how you can lock in rates - via bonds - if hold to par - and I can even see when like 2016 and 2014 have high asset growth this can cover withdrawals / leaving costs better - but don't pretend to understand the disconnet with annual fund performance.