Equitable Life with profits pension / takeover.

cronshd

Good news* :-) It passed!

Extract from equitable life web site:

Following a High Court hearing on 22 and 25
November 2019, we are pleased to confirm that today final approval has been received and the proposed changes will be put into effect on 1 January 2020.

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*If you were in the group who wanted it to be approved!

barryd999

pafpcg wrote: »

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.....
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.

Thanks for that.

At the moment I plan to probably take the pot on my 55th Birthday in February 2023 so just over a year or so. Is there any real point in me doing anything then? I presume I can change my mind at a later date? I tried calling the help line but couldnt get through and nobody called me back.

Im just a bit risk averse really when it comes to money. I dont really need to take it out but I just dont understand enough about money markets etc to make an informed decision. I also worry about the effects stuff like Brexit will have on the economy and markets. I guess that could go both ways though, could be good or bad but Im not a gambler.

Joey_Soap

Joey_Soap wrote: »

Just thought I'd post an update on my position with EL/Utmost AVC attached to a deferred DB pension. I have written to the trustees today to ask if it is possible to move my EL AVC pot to my SIPP once it is sent across to Utmost from EL. For sure, it's going to be less than GBP 10k as a lump sum so I will very likely ask for it to be paid out as a small pot lump sum. I'll keep you posted.

Thanks.

Soap.

Edited to add - It's just occurred to me, Utmost could actually do the small pot lump sum payout if they chose to cooperate, I guess? No need to do transfer to my SIPP then.

Just to update the group. It's now over a month since I requested Mercer, the trustees/admin of the group AVC plan I have EL holdings with. I have still had no reply from them. It is appalling and unacceptable that members are kept in complete ignorance whilst all this is going on. I have emailed them again today 7th December with a stiffly worded mail with links to the recent goings on at EL and Utmost. I find it hard to believe I am the only member of the group AVC scheme that wants to know what's going on. Dreadful, if anyone else has a EL AVC plan with Mercer I urge you to contact them ASAP.

Regards

Soap.

atush

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

More than 50% of those who bothered to vote?

atush

File a complaint

eumaeus

Deleted_User wrote: »

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.

You are right that if all policyholders' risk is to unit-linked funds then solvency ratio is probably not a relevant issue (I haven't looked into the risks for unit-linked pensioners).

However I (Buckner) am one of the non-profit policyholders for whom solvency is a concern. See the Eumaeus site (not allowed to post links as a newcomer) for an edited version of my submission (with replies from the two QCs).

It's fairly long (the judge was patient enough to listen for nearly an hour). My reasoning was, in brief (1) that the capital created for Utmost by matching adjustment is unlikely to reflect illiquidity risk, but rather default risk and (2) that we should not rely on the implausibly low probabilities of default suggested by the "PRA-approved" model. My example was the 1986 Challenger disaster where NASA management said the probability of disaster was 1 in 100,000. Physicist Richard Feynman immediately spotted that as implausible. Likewise, as I pointed out to Zacaroli, the Utmost Life probability of default is 1 in 500,000 years. So if an early-evolving human had taken out a policy 500,000 years ago, would only have lost their money once to the present date. How reassuring.

For all that, the judge thought that we could rely on the PRA probabilities. Having worked as part of a small team on the Matching adjustment mechanism from its inception, I beg to differ. These numbers are the result of extensive horse trading, pressure from HMT, Bank of England senior management etc, and are not to be relied on.

eumaeus

Scot_39 wrote: »

Cannot say I really understand exactly what MA is or what is going on here

It is this. MA allows a firm to create capital on the assumption that assets yielding higher than the gilt rate are safe if held to maturity. This is a questionable assumption in my view. There is no compelling evidence for a 'free lunch', i.e. a surefire profit achievable by borrowing at the bank rate and lending at a higher rate.

[Deleted User]

You are right that if all policyholders' risk is to unit-linked funds then solvency ratio is probably not a relevant issue (I haven't looked into the risks for unit-linked pensioners).

However I (Buckner) am one of the non-profit policyholders for whom solvency is a concern.

Sorry, what is a “non-profit policyholder”? If you mean “with profit” then solvency is a concern while we are with EL. Once we move to Utmost, we stop being “with profit” policyholders and become “unit linked”. At that point Utmost is effectively a broker and no longer carries market-related risks.

eumaeus

Deleted_User wrote: »

Sorry, what is a “non-profit policyholder”? If you mean “with profit” then solvency is a concern while we are with EL. Once we move to Utmost, we stop being “with profit” policyholders and become “unit linked”. At that point Utmost is effectively a broker and no longer carries market-related risks.

Non-profit is a standard annuity, and not unit-linked. A small proportion of the Equitable book is annuities such as mine.

As you correctly say, the unit-linked policyholders have little or no exposure to market or credit risk, after the scheme of arrangement is put into effect.

d

[Deleted User]

eumaeus wrote: »

Non-profit is a standard annuity, and not unit-linked. A small proportion of the Equitable book is annuities such as mine.

As you correctly say, the unit-linked policyholders have little or no exposure to market or credit risk, after the scheme of arrangement is put into effect.

d

Thanks. Understand now. Presumably the reserves should then be counted in relation to assets held within annuities only and can be reduced significantly vs status quo as most assets will become “unit linked”. Logically annuity holders should not get compensation but nor should Utmost deplete their portion of the assets held by the company. That’s just a typical solvency calculation for any insurance type product.

Is that what happened?