Equitable Life - reduction in payouts?

Thanks to all for replies....

The Sept 2016 Equitable press Q&A to which xylophone gave a link to seems to coincide with the letter I received from the CSAVC scheme administrators indicating that the 35% capital distribution might be suspended.

But as woolly_wombat has mentioned, there appears to have been a more recent announcement (Jan/Feb 2017) that this was no longer likely or intended. I received no letter or update informing me of this. But it seems the immediate need to re-think whether to cash in or not has been removed.

As for the actual value of my policy, it looks as if the g'teed value of £17k is higher than the transfer value of some £16k (which is the 'real' value of the policy plus some £4k as the 35% capital distribution).

In any case as I am now over 60, and past the retirement age originally stipulated in my Equitable policy, it seems I am contractually entitled to take the benefits at any time I choose up to age 75 and would qualify to receive the guaranteed value whenever I did so. So it seems the threat of non-payment of capital distribution wouldn't affect me anyway....

Thanks again woolly-wombat. I think I'm beginning to get to grips with the situation, but it's still not totally clear.

I was confused by the references to (and the risk of), suspension of capital distribution. I had thought that the capital distribution was comparable to the "final bonus" that with-profits policies traditionally paid out. It seems this is not quite the case. If I now read the documents correctly, the capital distribution is what would be added to the (basic) policy-value if you chose to transfer your policy-money early, or claim the benefits before your policy maturity date. That capital distribution is not guaranteed.

Where a policy has guaranteed benefits, the Equitable guidance states that if you take the benefits "at a time the guarantee applies", Equitable will pay whichever is the higher of either the guaranteed value, or the (basic) policy-value plus the capital distribution (the % of which is decided by Equitable and may vary). If you take the benefits at a time when the guarantee does not apply, you only get the transfer value (which is the basic policy-value plus a capital distribution.... minus an MVR if the company has one in place, which Equitable does not at present).

So much for the theory. In my specific case, the question now is - when does the guarantee apply? The basic facts are thus:

• my documents state that my scheme's with-profits policy ".... has a guaranteed benefit which is the minimum amount payable on retirement at a time allowed under the policy, or on death" [my underlining];
  
• my specified 'normal' retirement age of 60 (and thus the policy-maturity date) was in early 2010. It seems clear that if I had taken the benefits at that date, I would have collected the guaranteed value - whatever it was at that time;
• In fact I chose to leave the (matured) policy invested. I had of course ceased making payments into it;
• my latest annual statement says that the g'teed value of my policy is now some £17k, and that the transfer value is some £16k (with a note that this latter figure includes some £4k of capital distribution). So I deduce that my basic policy value is around £12k;
• the guidance from both Equitable and the scheme administrator says that I can take the benefits at any time up to age 75;

What is unclear from the guidance notes is what is meant by ".... at a time allowed under the policy....". In other words, when exactly does the guarantee apply? Only on the day of my retirement at 60? Or on certain selected subsequent dates? Or whenever - up to the age of 75 - I seek to take the benefits? And who decides on the applicability of the guarantee?


I plan to ask Equitable these specific questions. But I'd be interested to see what other forum members think is the answer!

woolly_wombat wrote: »

Nothing is ever simple with ELAS.

That quote is spot on. The plot thickens. I started with what I thought was a simple question about whether and how Equitable paid out (or might suspend....) the 'capital distribution'.

The more I try to seek clarification, the more complex the picture seems to become. Just to recap the key elements so far:

• my (Civil Service) AVC policy with Equitable currently has a guaranteed value (£17k) higher than the current transfer value (£16k);
• that transfer value includes some £4k of capital distribution;
• My normal retirement date, and thus policy maturity, was in early 2010. I am now retired and receiving my main Civil Service pension;
• I chose to leave the policy invested as I did not at that time need or see advantage to taking the benefits then, and believed it would grow in value and that I could take the benefits at any time thereafter;
• but I am now looking at my options.

I appear to have some choices. So I am trying to figure out what makes most sense and is most advantageous. So I wanted to clarify

(a) when the 'guaranteed value' (GV) benefit is payable. The Equitable guidance says 'at a time allowed under the policy or on death'. This appears to be on retirement and/or when the policy matures (ie in my case 2010). I had understood that if I left the policy invested, I could take the benefits (and get the GV) at any time thereafter;

(b) how I could take the benefits. I had understood that on or after maturity I could either take the policy value as a (lump sum) cash amount; or transfer it to another provider; or buy an annuity....

I still await confirmation from Equitable as to exactly when the GV is payable (ie at any time beyond retirement/maturity?).

Meanwhile I also sought clarification from the scheme administrators, MyCSP. Quoting the Equitable guidance that I could take benefits at any time up to age 75, and that the GV would apply "at a time allowed under the policy or on death" I asked them when and in what form I could take my Equitable AVC benefits, and exactly when the GV applied. To my slight surprise, they have said

Unfortunately, there are restrictions on how you can claim your CSAVCS policy with Equitable Life. ...... Scottish Widows and Standard Life allow members to access their CSAVCS policy flexibly as a full cash lump sum however Equitable Life do not offer this option.

.
When I probed for more details on the restrictions, and on when the GV was payable, this was the answer I got:

I can confirm that the rules with regarding to you being able to take your CSAVC policy with Equitable Life as a cash lump sum not being applied from 1/04/2015 was already in place before this date. Therefore, members with an Equitable Life CSAVC even before 01/04/2015 were not offering members with this option resulting in the options for you have never changed. This rule only changed from members with a Scottish Widows policy as Scottish Widows come to an agreement with [the Government] to get them the full cash lump sum option as of 1/4/2015. You are not restricted as such you just do not have the flexibility's to take you policy as a full cash lump sum as Equitable Life confirmed they were unable to provide this option for tax reasons. Your questions regarding the guaranteed value I have forwarded directly to Equitable Life to be answered.

Hmmm. If that is so (and despite the grammatical errors I assume the substance of that answer is correct) then it would appear that I have only two options for "taking benefits".

One is to transfer the value of my Equitable AVC to one of the other AVC providers (ScWids or StdLife) - in which case only the transfer value would apply, but thereafter I could, if I chose, draw some or all of the money out (to spend or invest in some other way....)

The other is to use the value of my Equitable AVC to buy an annuity - in which case the GV would presumably apply, but the annuity would not amount to much?

This has now rather overtaken my initial query as to whether - depending on when I chose to take the benefits - I might miss out on the capital distribution element.

But I am now less clear about what is the most sensible course of action: leave it invested as-is, transfer to one of the other two providers, or buy an annuity now (or later)?