Equitable Life with profits pension / takeover.

keiran

1) Wonder why the Court needs 2 days for this? - I thought it was a "rubber-stamping" exercise.

2) Nothing received (still) from NHS Scheme Trustees - Has anyone else?

3) I see that they're offering a "contribution of up to a maximum of £355 towards the cost of advice" if you use your own financial advisor. Presumably this would also apply to members within a group scheme?

Scot_39

No web update yet - does this mean the court case has ran over second day as well - and if so - when ?

The latest thing on google search for 'court ruling on "equitable" life' posted about 6pm - was something to do with Solvency II - but it needs a log in to read details.

UK court asked to rule on legitimacy of Solvency II matching adjustment... Utmost's planned acquisition of Equitable Life portfolio brings objection from ...

Don't see it on the court case list for tomorrow - but maybe it just ran over the update deadline - and justice Zacaroli has an item from 2pm - so maybe in the morning?

cronshd

Here is the latest update in full:

"The use of Solvency II’s matching adjustment (MA) to bolster an insurer’s capital position has been discussed at a court hearing in London.

The hearing, which took place over two days (22 and 25 November), was held as part of the normal process for a “Part VII” transfer of a portfolio of liabilities between two firms: in this case, Utmost Life & Pensions’ acquisition of Equitable Life’s legacy with-profits and non-profit contracts.

The deal has been sanctioned by regulators, the majority of policyholders and an independent actuarial consultant, but the courts must also rule on the transfer.

The court heard several objections from policyholders to the portfolio transfer – including one criticising the lack of diversity in the all-male Utmost board. Martin Moore QC, barrister acting for the insurer, was able to confirm one female is due to join the board.

Another objection came from Dean Buckner, a former technical specialist at the Bank of England, and critic of solvency regulations, who is an Equitable Life policyholder.

Buckner told the court Utmost’s reliance on the MA to boost its solvency capital made it a poor choice of insurer to host the portfolio. Utmost’s year-end 2018 solvency capital ratio was quoted at 178%, but Buckner calculated the ratio would fall to 21% without the MA, well below the 100% regulatory minimum.

He also attacked the concept of the MA, arguing discounting liabilities against a portfolio of risky assets to “create capital out of nothing” was irresponsible. Buckner cited experts including David Miles’ – a former member of the Bank of England’s Monetary Policy Committee – claiming that MA is “nonsense and a dangerous road to go down”.

Furthermore, even if the concept of the MA is acknowledged, then the benefit claimed by Utmost was three times as large as suggested by market prices, Buckner said.

Buckner questioned the impartiality and qualification of the independent expert’s report, saying the expert actuary was being paid by Utmost. He added most experienced (older) actuaries will not have had sufficient education in modern financial theory to give a proper opinion on the use of the MA.

Moore said Buckner’s intervention was “unhelpful and irrelevant to the decision” and urged the judge to consider the particulars of this case alone.

Once the transfer is complete, Utmost’s reliance on the MA would be minimal, he said, and even if the solvency ratio is well below 100%, the insurer would not technically be considered “insolvent”. This is due to an existing additional capital buffer (the risk margin).

He and the legal representative for the Prudential Regulation Authority (PRA) argued it was not in this court’s remit to consider the validity of the MA, which was part of regulation (Solvency II) that the PRA was obliged to implement in full.

Judge Antony Zacaroli said he would aim to make his decision and publish his reasoning as soon as possible. He added he was mindful of the 6 December court date scheduled in Guernsey and the 10 December date in Jersey, for approval of the transaction in those jurisdictions.

Scot_39

Thanks cronshd - Certainly a little more detail than the equitable posting. They just say awaiting decision - expected next week.
https://www.equitable.co.uk/media/65779/second-court-hearing-26-november-2019-.pdf


I am unsure how they could argue "majority of members" - at 26% at best.


MA - I know it's only one member's opinions - but as an ex Bank of England "expert" have to say his concerns will need to be listened to by the court - but others might argue he has an axe to grind (says he does not like the solvency rules etc).

But even if the PRA and Equitable disagree with him - there is a real risk that a "groupthink" style mentality is in place there - which sometimes turns out to be wrong / disastrous in the medium to long term. Regultors are generally poor / reactive in this country.

If you ask me -

the insurer would not technically be considered “insolvent”

- is hardly a high benchmark to be setting to defend the scheme.

Cannot say I really understand exactly what MA is or what is going on here - but doesn't paint a particularly healhy picture of Utmost - if it's solvency ratio could be argued to be so low as 21% post scheme.
It was bad enough in the Nov updates (Chief Actuary report) was speculating that Utmost may need additional capital from parent group (LCCG) to bring it back upto 150% from the figures he estimated.


Will wait to see if the scheme does get approved. And if Utmost / LCCG still want it ( they need to underwirte the 150% solvency).


But I am not so sure that Utmost is now going to be keeping any of my money for very long - I had thought of leaving part of total Uplift - as longer term investment in some JPM funds - if the scheme goes ahead.

[Deleted User]

the insurer would not technically be considered “insolvent”

I can see why the solvency ratio is important for banks and insurers (who have to weigh risks and liabilities vs capital).

In the case of a company providing unit linked mutual funds, the ratio seems meaningless. Of course there are normal market risks, but these are carried by the unit holders rather than the provider. The whole point of this exercise is to transfer the risks from the company to pension holders in exchange for cash, flexibility and potential of higher growth. And the pensioners voted “for”.

I am far from an expert; perhaps I am missing something in Dean Buckner’s logic.

Scot_39

I had a similar feeling regarding Equity unit linked holdings - essentially JPM would hold the cash rather than Utmost - but I could very easily be wrong.

It gets messy very quickly - I once asked one of my PP providers how my investments were protected - and it came down to their in house fund manager being a ring fenced non-trading company ... - so technically couldn't collapse ... etc.

I am not sure regarding cash - but who for instance underwrites the cash held by Utmost - including potentially the secure cash fund - is this actually a third party fund manager ? - is it the money market fund ?

If this is held on deposit - is it only one bank - then solvency is important to members - as FSCS will perhaps not cover large policy values etc. ( although it does say 100% of conventional policies - but only £85K for SIPPs - but wouldn't want to test it ).

And solvency important to regulators - who need to avoid schemes calling on FSCS style protection. Private equity pensions protection in the UK is still a bit of a mess / stuck in some ways in the past - as I suspect SIPPS are weaker than conventional arrangements - as capped at £85K from memory.

I frequently have cash in my SIPP as I switch in / out of the market - shares and or funds etc - and in one case it gets held in pooled deposit accounts - shared out at upto I think now 8 different banks overall. But they do not tell me which or how many my individual cash would be with - so don't tend to leave it there too long - or let it get large just in case.

I think it is dangerous that ultimately a judge has to make a decison based on conflicting experts opinions - but suspect he may in the end side with the PRA legal advice.

Teutanic

a) In the Chairman’s statement 2019 it was made public that "following the announcement of the sale (to Utmost), Chris Wiscarson decided that it was the right time for him to retire as Chief Executive." Was this premature departure a mere coincidence?

b) As regards the delay in the Courts verdict it may be that Equitable has more explaining to do than originally thought. I for one have put objections along the lines of:
- unilateral amendment of the Terms and Conditions by Equitable of my contracts
- whether identified practices followed in the transfer are fair and lawful trading and business practices or they warrant further supervisory and judicial scrutiny
- if formal flaws in the proposed transfer process warrant dismissal of the Transfer application on formal grounds.
All these require additional consideration effort from the Court and this takes time.

c) In a parallel development the German police arrested on the 22.11 and on grounds of tax fraud and evasion at multimillion niveau the ex-chief tax specialist in Frankfurt of the solicitors of Equitable that handle, among others, the customers objections during the current Court process. Very reassuring indeed...

barryd999

Im only dipping in and out of this now but is it all done and dusted now in terms of the courts approving it? Cant find any bang up to date info.

Also I have to make choices on investments. What happens if I dont bother? Havent got a clue and will probably call one of the helplines but its also likely Ill cash mine in when I am 55 in 2021.

pafpcg

barryd999 wrote: »

Im only dipping in and out of this now but is it all done and dusted now in terms of the courts approving it? Cant find any bang up to date info.

We're still waiting for the High Court judge to issue his final judgement following the hearing a week ago. Monitor this thread and you'll be able to read what the final decision is.....

Also I have to make choices on investments. What happens if I dont bother? Havent got a clue and will probably call one of the helplines but its also likely Ill cash mine in when I am 55 in 2021.

Assuming the transfer proposal is approved, if you don't respond to the mailings about your choices, then your pension money, with the uplift, will be transferred into an Utmost cash fund (guaranteed not to go down in value) on Implementation Day (1st Jan 2020); it will stay in that fund for six months and then it will automatically be moved to other Utmost funds in slices over the following six months. The funds that will be used will depend upon your age.

Scot_39

Hearing ended last week - still waiting for court judgement - so not done and dusted

No investment form now = money into secure cash fund - and unless you submit an investment choice in first 6 months - money invested by automatic age profile

https://www.utmost.co.uk/equitable-life/equitable-pension/what-if-i-do-nothing/

Will be interesting to see if the dates slip any given delay in court ruling - as current investment form deadline is December 13th for immediate action in Jan.