# Key Post: Equitable Life with profits bond - what should I do



## Marion (31 Aug 2001)

I realise that this is a subject that received a fair airing on your old server ... but rarely a week goes by when I don't see something in the press that increases my sense of foreboding about Equitable Life. The latest reports related to the likelihood of members voting against the 'compromise deal' and ensuing question mark over the Hibernian investment. I had the misfortune to invest my total savings of £35,000 in a With-Profits bond in early 1999. Is it time to cut my losses and pay the redemption penalty? What's the worst case scenario if I stay in?


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## ennism (31 Aug 2001)

*Re: Equitable Life*

I think its possible that the members won't accept the Halifax compromise proposal. In this case the business would become insolvent. You may, then, be able to transfer your assets without suffering redemption penalties.

I'm not any form of expert in this though. My interest is that I have a pension with EL - a small percentage went into with-profits and a larger percentage went into units. 

I worry that the Irish members won't be covered by any 'deals'. Our assets were certainly excluded from the Halifax deal.


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## ClubMan (31 Aug 2001)

*Re: Equitable Life*

<!--EZCODE BOLD START-->* Our assets were certainly excluded from the Halifax deal.*<!--EZCODE BOLD END-->

I too have a vested interest in this unfortunately! However I'm confused by the statement above. I originally thought that this was the case but eventually (having re-read the various missives I received from EL over the past few months, and having read ) I came around to the conclusion that the Irish unit linked business <!--EZCODE ITALIC START-->_ did_<!--EZCODE ITALIC END--> after all fall under the auspices of the Halifax deal even if statements etc still originate from EL. 

However you seem very certain that this is not the case so I'm beginning to become doubtful again....


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## Brendan Burgess (31 Aug 2001)

*British Government launches inquiry into Equitable*

<!--EZCODE ITALIC START-->_ The British government has launched an  inquiry into the cause of mutual life   assurer Equitable Life's dramatic slide into financial difficulty.  _<!--EZCODE ITALIC END-->

Full details at:                                                   

[broken link removed]

Wella.


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## Brendan Burgess (1 Sep 2001)

*Re: British Government launches inquiry into Equitable*

This is my understanding of the situation:

If the Halifax deal is rejected, then the current position continues. 

There is no question of the Equitable being insolvent. Insolvency is an excess of liabilities over assets, which is manifestly not the case with the Equitable. 

At present, Irish with profit bond holders (taken out since early 1999 ?) are subject to an MVA if they cash it before the 5th anniversary. 

Michael C. , you are half way towards this 5th anniversary. My gut feeling would be that you should remain invested. The Irish with profits fund has been treated separately and so far, has not been too seriously affected. However, if you are worried about it, take the hit now and reinvest elsewhere. 

Those holders of unit linked funds have absolutely nothing to worry about. They are being managed as before. I don't know if the Irish units are being managed by the Halifax or the Equitable, but it doesn't really matter. 

The with profits pension is a bit more tricky. There is an MVA if you cash it before retirement. If that is a long way away and if the with profits element forms a large part of your assets, then you might be better taking the hit now and not worrying about it.

Brendan


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## delboy (1 Sep 2001)

*equitable life*

-is it not the case that clerical medical are involved in managing the unit linked funds?
-what happens to unit linked funds including those in a pension plan if it was the case that equitable became insolvent?
-am i correct that unit linked funds are ring fenced -can also anyone confirm that unit linked funds in equitable are not protected by any irish govt. schemes?
-does the uk investor protection scheme protect irish investors just in case and if so to what amount?


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## Brendan Burgess (2 Sep 2001)

*Re: equitable life*

Hi delboy

I think that all Irish Investors come under the Investors Compensation Scheme if the business was transacted in Ireland. If it wasn't , I am sure that the Irish offices would be highlighting the lack of protection.

The scheme covers 90% of an individual's losses up to a maximum loss of €20,000 . 

I don't know if it applies to pension schemes.

I have always understood that the unit linked funds managed by a life office are ring fenced. Certainly in a solvent company they are. In other words, it doesn't matter to a unit linked holder if , say Ark Life, is profitable or not.

You would need to get a more technical legal opinion, but with most unit linked funds, the assets are assets of the company and the liabilities are liabilities of the company.  I think the owners of unit linked funds would have a prior claim to the with profits policyholders, but it's worth checking out.

Brendan


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## galwegian (3 Sep 2001)

*Equitable Life*

Firstly unit linked policy holders have no exposure to the EL debacle, the liability is confined to WP policy holders. The question of coverage of the policyholder protection scheme has been on-going for sometime. General opinion indicates that the International Policyholders (Guernsey, Ireland, Dubai and Germany) are NOT covered by the UK scheme should the Society become insolvent. The Guernsey group have indirectly hired a legal firm in London called Norton Rose to establish their rights through the courts. The solvency question is very much tied to the liability of the GARs, the problem is that opinion differs as to the size of that liability, this is why the Prudential backed out of the proposal to purchase EL. It should alse be remembered that EL recenty applied and got permission from the FSA/Treasury to use FUTURE profits from currect investments to maintain its solvency statement. The UK government has already announced that it will not provide a survival boat to EL should the compromise deal be rejected. A rejection of the deal would be very serious for the company. Vanni Treves stated that insolvency would be lethal for pension holders as any residual fund values transferring back to individuals would be liable to income tax. A final comment - Standard life policyholders in Ireland are also not covered by the protection scheme as they are also a UK company, they confirmed this to me when I went looking for a new home for me EL pension.


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## ennism (3 Sep 2001)

*Re: Equitable Life*

I talked to the Central Bank about whether EL policyholders are covered by the 'Investor Compensation Company Ltd' ICCL scheme.

They said that EL is regulated as an insurance company, and therefore is ineligable for the scheme. They thought that the Polcyholders Protection Board in the UK might cover the policies, so I called them.

They said that the question of whether Irish policyholders are covered has arisen recently, and that the matter is with their solicitors. They are not sure when their solicitors will provide a verdict, but advise calling back in a couple of weeks.

PPB scheme details are:
  -90% of loss covered
  -No maximum is applied (ICCL = EUR 20,000)
  -These rules are not hard & fast in that they will examine the details of each policy claim seperately.

Ref: 
<[broken link removed]
<www.centralbank.ie/docume...klet.pdf/>
PPB Ph: 0044-207-600-3333; Ask for PPB


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## Brendan Burgess (4 Sep 2001)

*Equitable Life is not insolvent*

Insolvency is an excess of liabilities over assets. A Bank such as Barings has assets in the form of loans to its customers. Its liabilities are its deposits from its cusotomers and any funny trading instruments.   Its liabilities can increase dramatically if a rogue trader does some very big deals. Its assets can diminish if it finds it difficult to collect its loanbook. 

A with profits life assurance company is a completely different animal. Its assets are its investments. Its liabilities are the amounts which it is <!--EZCODE BOLD START-->* contractually*<!--EZCODE BOLD END--> bound to pay to its with profits policyholders.  The liabilities of the with profits fund are a small fraction of the total assets of the fund. The actuary has huge authority to impose MVAs and reductions in bonuses, so its liabilities will never exceed its assets - it will never be forced into insolvency.

There was some talk of voluntarily declaring insolvency, but this seems a hare brained idea and has been dismissed by the board of the company.

Brendan


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## Now I understand (4 Sep 2001)

*Equitable Life*

Life companies can't go insolvent like other companies, because they can always simply write down their liabilities at the stroke of a pen.

Not much different to the punter.:eek


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## Galwegian (6 Sep 2001)

*EL Solvency*

Unfortunatley when EL tried to write down its liabilities it was taken to court and eventually to the House of Lords where they were forced to stand by the GAR, hence the mess at the moment. Now they need the agreement of the GAR and non-GAR policyholders to remove the liability. The deal will include a payoff to the GARs. Going forward though the EL WP fund will be a closed fund assuming the deal is accepted (big assumption). Trditionaly closed funds provide conservative returns.


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## Get OUT (16 Oct 2002)

*Equitable life*

I had a w/p pension policy.
I am 62 years of age and decided to take my pension
E/L imposed a penalty of 12%
IF I transferred my policy to a other company the penalty
would have being 20%

HIT HARD


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## ClubMan (16 Oct 2002)

*Re: Equitable life*

<!--EZCODE BOLD START-->* I am 62 years of age and decided to take my pension
E/L imposed a penalty of 12%*<!--EZCODE BOLD END-->

What was the normal maturity date of your policy? Age 65? I thought it was 60 for EL WP pensions in which case no MVA should apply on maturity or each anniversary thereafter?


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## s (19 Oct 2002)

*Equitable collapse?*

Worst case scenario Equitable collapse would there be enough assets in the fund to pay a value on your policy?  If you are of the opinion that there might not be then its wort considering paying the penalty to get out now.  Best seek advice now on your individual situation and review possible options. 

S


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## Brendan Burgess (13 Dec 2002)

*Re: Equitable collapse?*

There appears to be an Equitable members group for Ireland contactable on blancks@yahoo.com.

Brendan

_Edited by ClubMan to fix email link (but it didn't work!)._


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