Five questions on: Equitable life payout
Ah, has the troubled mutual insurer finally agreed compensation for its fed-up policyholders?
You're talking about the decade-long fight that policyholders had to get compensation after Equitable was forced in effect to scrap guarantees on its with-profits policies back in 2001. That was sorted a couple of years ago with policyholders finally accepting the Government's compensation offer of around 25p in the pound.
So what's the payout this week?
It was good news for some 345,000 policyholders in Equitable. They will receive a 25 per cent boost to their payouts, which works out at roughly £2,000 for a policyholder with a £10,000-value fund. The money – an estimated £750m – will be distributed to policyholders on 1 April, next Tuesday.
Hang on, where's this cash come from?
Bosses have been working to reduce the society's financial risks. Moves such as a withdrawal from the annuity market and the sale of around £120m of commercial property has freed up the capital which is now being passed back to policyholders.
So is it now time to cash in and leave?
The company has removed a 5 per cent exit charge but Chris Wiscarson, chief executive since 2009, stressed that the move did not mean that long-suffering policyholders should cash in. "Over the past decade, there have been many reasons for policyholders to leave the society, but one big reason to stay. This is it," he said.
But if I can take the extra cash now, what reason is there to stay?
Insiders suggest that there could be further distributions which any policyholders leaving now would lose out on. If you need the money now, then take it. But leaving it with the Equitable could mean a bigger payout in the future.
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