This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
MARKET COMMENT
By
At last the 1m policyholders in Equitable Life are able to see the details of the proposals relating to its notorious with-profits fund. As Equitable's chairman says "we have no illusions. Our proposed scheme may not satisfy everybody. In a very difficult situation, we have concluded that the compromise we are recommending is the fairest and most realistic way forward". The basic proposal is that Guaranteed Annuity Rate (GAR) policyholders will receive an average uplift of 17.5% in return for giving up their guarantees. Non-GAR policyholders will receive an uplift of 2.5% in return for waiving their right to any claim because they were not informed about the implication of the GAR situation when they bought their policies. The initial legal opinions into this matter indicated that the non-GARs do have a right to claim however there were considerable differences concerning the valuation of such claims. The Equitable Life Policyholders Action Group has backed the proposals saying that there is "no option" other than to support the compromise. The increases will be funded by the £1.06b set aside after the House of Lords ruling last year and £250m from the Halifax, which is conditional on a compromise becoming effective by 1 March 2002. GAR policyholders have apparently been offered more because the benefits that they are giving up are larger. Non-GAR policyholders that have already left the fund will have to bring any claim on a individual basis. What happens next? Equitable will be holding policyholder meetings around the country where the directors will be available for questions. Following this a final proposal will be drafted and sent for regulatory approval. Once approved the full document will be posted in November and a vote will take place around the end of the year. If approved (which requires a majority in number of each class of policyholder and three-quarters by value) the agreement will then need to be ratified by the High Court before taking effect. Hopefully this sorry tale is now entering its final chapter. For those of us not involved it's a good lesson that, in such ring-fenced investment funds, there is only so much money to go around. No matter what claims and promises are made, none of them can increase the size of the pot. If you want more, someone else has to settle for less. It's a vicious circle and the only way out is for the majority involved to admit to the fact that they have to cut their losses in order to move forward. However, it's almost impossible for people to assess whether what they are giving up is fair in relation to everyone else. There has been speculation that the affair will stop many people saving for their retirement. But it is not saving for your retirement that is the problem, it is how you do it. Obscure, high-charging schemes have no place in any sensible retirement plan. Whatever the outcome of the vote, the very best of luck to all concerned. More: Equitable Life discussion board