Equitable Life has recently gone through an exercise where it wrote to all its existing policy holders to outline its plans to sell its business to Utmost.

The deal will see with-profits policyholders losing guarantees previously offered by their Equitable Life pension scheme. These guarantees may give guaranteed investment growth, or in some cases, other valuable benefits, for example annuity rates higher than those ion the open market.

The decision to both take the proposed windfall and switch to a unit-linked policy is complex.

It does look likely that the proposals will succeed and in return, policy holders will get a one off uplift to the amount in their pension savings of something in the order of 60%-70%.

As the decision is subject to a member vote, it is not a final deal yet, but the paperwork sent to policyholders is highly complex and also details a new Utmost plan with default investment options.

Individuals who still remain with Equitable Life will principally fall into two categories:

  1. those who made an educated assessment that they would be beneficiaries of what transpires to be an over-provision of resources by Equitable Life, and
  2. those who have not made any meaningful decision, either due to lack of understanding or lack of interest

In either case, individuals will see a default investment choice applied to their policies if the transfer to Utmost completes and, for many, a charging structure which is less competitive than that which is available on the open market.

It is not clear that the Utmost pension will offer the full range of functionality which was introduced to pensions in 2015. New rules increase accessibility and flexibility of death benefits, but may not be available within the Utmost contracts.

For reasons of the appropriateness of their fund choice, and the suitability of the Utmost plan individuals will be well placed to seek independent financial advice on what their options may be.

I have looked at a number of such Equitable Life policies and am in a position to give meaningful advice to people in the run up to the January 2020 transfer of assets completes and initially would welcome an informal chat to anyone who is impacted by the matters raised in this piece.

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