Following Friday's announcement that the Equitable Life has closed to new business, CCF Financial Services have been inundated with calls from concerned policyholders.
Advice to Equitable Life policyholders
There is no need to panic at this announcement. Policyholders have a number of options depending on how long the policy has been in force and the type of investment fund. Whether an individual policyholder, a member of a group scheme or an employer it is recommended that you seek independent advice before making any decisions as options and penalties vary.
If you have taken out a new policy within the last 14 days you should consider exercising your statutory right to cancel the policy before any premiums are collected.
If you are invested in the With-Profits fund then seek independent advice before making a decision as the Equitable has announced that it will apply a 10% charge if monies are withdrawn from the With-Profits fund. If you are within three years of retirement it is unlikely to be in your best interest to withdraw from this fund but if you have more than ten years left before retirement it may be in your best interest to transfer to a new provider.
If you are invested in Equitable's unit-linked funds, the decision to transfer is slightly easier as there should be no penalty applied but you should still seek advice before making a decision.
Employer or members of company schemes with Equitable Life need to make more complicated decisions quickly: whether to run a new scheme alongside the Equitable plan or take advantage of Stakeholder schemes next year. As no new members are being taken on by the Equitable, employers need to find another option for people becoming eligible to join their company scheme.
For further information contact Phil Ashwell. email email@example.com, phone 01223 472200
Background notes for editors
From Friday 8 December 2000, mutual insurer, The Equitable, will be taking on no more new business, after talks over its possible purchase collapsed.
The Equitable put itself up for sale in July after losing a legal battle which left it with obligations of 1.5 billion. The decision not to write new business follows the society's failure to find a buyer.
The Equitable said it would stop writing new business immediately, and would sell or reorganise its operations which are involved in new business. But it said it remained solvent and would continue to pay out benefits and accept premiums under existing policies.
The court battle focused on Guaranteed Annuity Rate (GAR) policies sold by Equitable Life.
These let policyholders opt for minimum pension payouts with a bonus when their policy matured.
Longer life expectancy and lower interest rates meant a shortfall in funding.
Equitable asked policyholders to accept a lower bonuses or give up their right to guaranteed annuity rates.
Policyholders launched the legal action alleging breach of contract and abuse of discretionary powers. Equitable Life won the first round in the High Court , but the Court of Appeal overturned the judgement ruling that the society was obliged to pay out the guaranteed rates and bonuses.
The aggrieved policyholders then won at the House of Lords in July.