Equitable Life with profits pension / takeover.
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Ive decided to vote for the transfer based on what I have read on here, seems a no brainer for me.
I also have a document asking me what I want to invest in. Havent got a clue although to be fair Ive not read it in detail yet. I will probably cash it in when I am 55 in 2021 or at least some of it. I probably want the least risk possible I think. Any ideas what I should do?0 -
I am concerned at the way all this is being handled tbh.
Initially there was no information about draw down(taking cash lump sums) and on posing the question was told the terms and conditions would be the same as Equitable so would be able to draw down.
Now I read on the Equitable website that Utmost will be producing a draw down facility early in 2020. Why no mention of this in the hundreds of pages of blurp sent out?
All seems a bit ad hoc to me.0 -
Make it up as you go along?0
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'cash it in when I am 55 in 2021 or at least some of it. I probably want the least risk possible I think. Any ideas what I should do?'
Anyone would need much more information about your circumstances to give good advice, but here goes anyway.
Everyone wants 'least risk', but doing that rarely brings the biggest reward; you need big risk to get big rewards, but big risk can result in big losses. Some assets swing wildly in value over the months/years, like company shares or whole markets; others less so, like government bonds, and some hardly at all like cash deposits.
If you NEED the money in two years shares would be too risky for most people, given their value could have dropped 50% in that time; so cash or short term government bonds would be suitable. But if you'll 'cash in' in two years and then buy shares with that money, planning to invest for ten years, you might as well get the shares now.
If you have squillions elsewhere, you have a real dilemma: a cash deposit will do since you don't need better returns; and equities will do since you can afford to lose a lot of it anyway.
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I think the proposal is an obvious win for all policyholders and I'm voting for it. My equitable savings are quite a bit higher than the average (which I've read somewhere are about £7,500?) and represent about 25% of my total pension savings.
For me there are three main considerations:- is getting an enhanced payment now better than the guaranteed annual increase?
- will Utmost be a "good" home for my pension savings?
- what will happen if the proposal isn't agreed?
Answer 1: No doubt about it: I'm taking the money now. A capital uplift of 70% is instantly worth 21 years of guaranteed growth at 3.5% (which is my guaranteed rate, I think others have different rates). If I can find investments which yield just 1% on that enhanced fund, which isn't difficult, it will be equivalent to over 35 years of guaranteed growth (I'll be 90 by then). 2% would be equal to over 100 years growth! Remember also, that the capital distribution might cease to exist in future if this proposal doesn't go ahead. My view is take the money while it's on the table.
Answer 2: Utmost is regulated by the FCA and PRA and is covered by the Financial Services Compensation Scheme, so any of your investments they hold up to £85,000 are covered by the government. If your investments are in funds, the £85k limit applies to each fund provider. That means Utmost is as secure as any other home for your pension pot.
BUT I don't really care how "good" or flexible Utmost is going to be. As soon as I have the enhanced distribution, I will transfer it out and combine it with one of my other pension pots.
Obviously Utmost doesn't want everybody to move their money, but they can't stop you.
Answer 3: No-one knows what might happen, but we do know that Equitable has been closed to new business for 20 years, policyholder numbers are decreasing and costs are being shared by fewer people all the time. It's going to have to close down at some point. Perhaps, if you're still around at the end, your share of capital might be higher, but who knows if you will be and who knows what will be in the pot by then?
If you are still with Equitable you either had no motivation or inclination to move your fund elsewhere (me!), or you were very canny and realised you might get a larger share of the capital as other members left or died (that became my view since they started offering the 35%).
Although Equitable has been a rough ride, I think it has finally come good. With the enhanced capital uplift my returns over the last 20 years or so will be equal to about 5% pa. That's not stellar, but it's as good as plenty of other pension funds.0 - is getting an enhanced payment now better than the guaranteed annual increase?
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I think that the arguments you've made for each of your three answers are rational for you and your circumstances. For those nearing the stage of taking benefits, the option of "take the money and run" seems attractive; certainly, when my partner and I sit down together next month to decide which way to vote and what to do if the proposal is agreed, I'm expecting that's what we'll be doing. But other Equitable policyholders may have different circumstances and viewpoints.I think the proposal is an obvious win for all policyholders and I'm voting for it.
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Just one quibble - when you say "A capital uplift of 70% is instantly worth 21 years of guaranteed growth at 3.5%" you're not comparing like-with-like. Under the present arrangements, the Capital Distribution already gives an "uplift" of 35% so you'd have to halve the result of your calculation. Of course, we don't know if the Equitable's Capital Distribution would increase or decrease in future years if the proposal were to be rejected, but for policyholders with twenty or more years before drawing benefits, the calculation is much less clear-cut.0 -
I voted “for”. The incentive is worth having; I am also keen to finally consolidate a few smallish pension pots I have in the UK into a single SIPP with much lower charges and investment vehicles which better match my overall investment policy.
Of course I was always able to transfer out, but now we would get something in exchange for giving up the “guaranteed” mediocre return. And the 3.5% guarantee, while a good deal for fixed income, will be at risk as
1. the actual bond returns, which with profit funds invest in, revert to long term average or worse - as tends to happen following stellar growth
2. Inflation takes off (which it might, despite what our recency bias is pushing us to believe)0 -
Just one quibble -
I took 70% as my figure quite deliberately. If this proposal is not approved, there is no certainty the 35% distribution will remain. However, to address your point, the "additional" 35% is still equivalent to nearly 10 years growth on its own. A modest return on that sum, say 2%, still puts you ahead of an annual 3.5% for 20 years.
You say "For those nearing the stage of taking benefits, the option of "take the money and run" seems attractive". I have tried to find out the breakdown of policyholders by age, but haven't been able to find that anywhere. If someone has it, that would be very interesting. However, in 2014 an article in The Telegraph stated "The average age of the 400,000 policyholders invested in the with-profits fund is 59...". So presumably the average age is now about 64. As Equitable has been closed to new business for nearly 20 years, it seems likely that nearly all policyholders will be "nearing the stage of taking benefits". As I argue above, even if you are 20 years away, the enhanced distribution is better than a guaranteed return of 3.5%.
One further thought: I believe the further away you are from taking benefits, the higher the value of the uplift (mine, for example, is 84%).
Given the uncertain future of Equitable and any distributions, I just can't see that sticking with Equitable makes any sense for anyone. I'd be interested to hear people's reasons for voting against the scheme.0 -
Assuming the above post is true (in which a very good argument has been put forward) , you have to wonder what Utmost will get out of this takeover - presumably the vast majority of pension-holders will transfer out as soon as they've got the 70% uplift...
Incidentally, no news at all for me from the NHS Scheme...0 -
Assuming the above post is true (in which a very good argument has been put forward) , you have to wonder what Utmost will get out of this takeover - presumably the vast majority of pension-holders will transfer out as soon as they've got the 70% uplift...
Incidentally, no news at all for me from the NHS Scheme...
A percentage will transfer out, they made an assumption. I would assume less than 50%. Those who have stuck with EL since 1990s are not prone to excessive mobility0
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