Equitable Life bonus comes with strings attached

By CHARLOTTE BEUGGE FOR MAILONLINE
Updated:

Nearly 400,000 Equitable Life policy holders will be getting bonuses added to their plans - a year after it cut policy values.

But the insurer, which nearly collapsed 11 years ago, says the bonuses on its £5.5 billion with-profits fund are not guaranteed and could be taken away at any time.

Pension savers will be getting a bonus of 3.5 per cent plus a one-off increase of 2 per cent.

Equitable Life

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Life policy holders - mainly endowments - will get a 2.8 per cent interim bonus plus a one-off 1.6 per cent payment. Neither the bonuses nor the one-off payments are guaranteed.

In 2008, Equitable cut pension plan values by 3 per cent and again, by 2 per cent, last year - and it did not pay a bonus. For life policy holders, the figures were 2.4 per cent and 1.6 per cent.

So the latest payouts simply reverse the earlier cuts and add a little bit more for pension plan holders, but they give a bit less to endowment holders.

Since 2007, current policyholders have not had anything added to their plans which has not later been taken away; at that time, pension savers got 5 per cent and life policyholders 4 per cent.

In addition, Equitable plan holders still face a 5 per cent market value reduction if they try to take their money away.

The fund is currently 80 per cent in fixed interest and rose in value by about 10 per cent last year.

Robert Reid, of adviser Syndaxi, says: 'This is all very well, but it doesn't help the real victims of Equitable Life, the annuitants, who had their income halved.

'They can't move their money out and any bonuses paid have no effect on them.'

Next week, the traditional with-profits bonus reporting season will be started off by Aviva, the former Norwich Union, announcing bonuses for its 2.3million policy holders.

As all asset classes - such as cash, shares and property - increased in value last year, with-profits funds should have made money.

But policyholders should not expect huge bonus rises, as the funds' actuaries may use much of the gains to shore up the fund rather than pay out large bonuses to investors, investment experts warn.

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