Equitable Life pension question for IFA/City types

[MikeyT]

Sorry to bore people to death with this but have pension with Equitable Life - fund worth about £22k - seem to have had it for years but what the hell.

PAYE so erring on transfering into new company's fund, BUT being penalised 20% of fund total by ELife!

Do I take it out and incur the penalty? I know ELife have had an up and down time but I don't feel safe with it being with them to be honest. Can just cease payments but then the fund just stands still apparently until I reach 50 and decide to take it for whatever.

Thanks

[sparks]

Is it 'with profits' or unit based?

I have a unit based account (hammered by the crap state of the stock market) which could pick up, so i'm keeping it, but not paying in any more.

I read an article, that suggested that you should take the penalty, if you have a with profits fund, but that may have been before they put it up to 20%.

Best to get some advice (read the financial sections of Sunday papers) from an accredited adviser.

Good luck

Sparks

[MikeyT]

It's 'with profits'.

Think the general consensus in the financial press is to take the 20% hit - just wondered if there were any others in the same boat.

I can transfer into another similar fund (not the Group Pension Plan I've just joined) - would this be a good idea and is it better to 'spread the risk' somewhat?

TIA

[HarryW]

20% to take your OWN money out, WTF , I take it this has increased recently to put you off taking YOUR money out of a sh*te company :fume:.
Out of interest has anyone challenged these/this company for their obvious exit rip off fee's, surely its extortion, they couldn't possibily justify 20% as a 'reasonable figure to cover their out of pocket expenses It would be interesting yto see what the courts would say about it, for the sums involved here Mikey it would be worth a punt in the small claims court .
I'm sure if I had a lot of money in EL and it had lost due to the fcukwits that run it I'd be after my pound of flesh, believe me, like an elephant I would not forgive nor forget.

Harry

[sparks]

Harry,

Much as I agree with you, if they didn't do this, lots of people would leave, and they would go bust, leaving anyone who couldn't leave (for whatever reason) well out of pocket.

It is a most unfortunate position, caused by a small number of greedy individuals who wern't getting quite what they were promised by Equitable, and the ensuing legal battle bought down the oldest mutual company in the UK.

It is all very complicated, and I am sure I would have been pissed off if I was one of those few, but they have wrecked a very large number of peoples future, for what I see as an insignificant sum.

I am luckily not affected directly (unit fund) but it is indirectly affecting me.

Sorry if I have offended anyone, but these are my views, given the info Equitable has provided me.

Sparks

Edited to add :

Mikey, I think you already know the answer. Bite the bullet, and transfer. The only other option is to hang on, and hope that the exit penalty reduces.

>> Edited by sparks on Monday 17th February 13:30

[Maf]

With profits in most cases is really just mainly equity investment underneath (slightly different in Equitable Life’s case as they now need to be cautious). The figure they show as a “value” is just pretend and people have liked this for many years because in general they are scared to see equity prices go up and down.

They let you have this pretend value at a normal retirement date, then what you get is “smoothing” between generations of customers. That is the customers retiring in good times get less than if they had be in a equity based unit policy, and those retiring in bad times get more. It is a sharing of risk that people have liked for many years because in general they are scared to see equity prices go up and down.

However, if they let people chose when to take their pretend value (like transferring early) they run the risk of everyone doing it at bad time and there not being enough to go round (called “selection”). Hence the 20% penalty is actually just to get you from the pretend value to the real value of the assets underlying the investment. THE INSURANCE COMPANY DOES NOT POCKET IT, EVEN EQUITABLE!

Just imagine you had put all your money in the stock market three years ago. You would be getting a lot more than a 20% penalty compared to what you put in currently.

As to whether it is a good idea to transfer only time will tell and it is a personal choice. I would say that the younger you are the more likely you are to benefit from better returns elsewhere.

More than happy to answer any other general questions on how these kind of things work.

Cheers

Mat

[MikeyT]

Thanks for the responses, I think I'll end up biting the bullet in the end.

That small claims thing wouldn't work Harry, they had a vote of all pensionholders and the like and IIRC, voting for a penalty and suspending all legal action threats actually meant the Equitable were able to trade - a vote against would have been catastrophic.

Thanks again for everyone's advice.

[paulc]

I took the plunge and opted to transfer out of Equitable Life early last Novemeber. As a word of warning I'm still waiting for the transfer to actually happen. Equitable have quoted that they don't expect to release the funds until mid March!

[uk66fastback]

Perhaps the oldest thread resurrection ever!? uk66fastback though now, I'm no longer MikeyT

Here we are again then - good old Equitable Life. I don't know whether any of the posters on this thread are still around on PH ... I think Harry W seems to be. I never transferred out of the fund 16 years ago but will be doing soon (see below).

Current state of play is that Equitable Life are winding down their operations and all of their with profits plans are being transferred to Reliance (part of Utmost - or vice versa) and these plans will become unit-linked policies.

This transfer is having to go before the courts to get approval and if all goes okay, according to their communications, policy holders can expect 'a 60-70% uplift' to their policy values. All good stuff and unexpected. You can of course choose to leave before the end of the year, but would only get a '35% capital distribution' ...

So this just an update but a question also: I am thinking that after the 60-70% increase into the fund, the full range of options will be available still - ie leave, take a portion of up to 25% etc - and then buy an annuity or do something else with it (drawdown etc).

I did phone Equitable and got put through to their 'advisors' and couldn't make the guy understand my question ...

Any help appreciated.