Your Money | Melanie Bien

This deal isn't Equitable, but it's the only solution

The compromise deal offered by Equitable Life to guaranteed annuity rate (GAR) policyholders was set out this week in the form of a weighty 200-page voting document. Some 485,000 individual policyholders and 6,000 group scheme trustees get to vote on the proposals.

The final version is largely the same as the draft proposals published back in September. Equitable is offering GARs and non-GARs an uplift in the value of their fund in return for them giving up certain rights. GARs will receive an average rise of 17.5 per cent, while non-GARs will get a 2.5 per cent rise.

But if these terms are not agreed by 1 March next year, policyholders could end up getting less than that because Equitable will not receive £250m from the Halifax. This sum was offered when Halifax bought most of the society's assets last February, on the condition that a compromise was achieved.

The packs do not tell policyholders what their vote will be worth if they vote yes or no. It depends on investment performance, the level of interest rates at maturity, the outcome of any litigation against Equitable and how many other policyholders jump ship early.

But we do know that if policyholders approve the proposals, the instability created by the uncertain cost of GARs in the future and the threat of a mass of individual GAR-related legal claims by policyholders will be avoided.

Voters will be asked several questions, seeking approval of the compensation deal and reassurance that the policyholder is not going to sue the company. A majority needs to vote yes; if this doesn't happen, the whole deal is off.

The deadline for votes is 11 January, and it is in the interests of those voting to agree to the proposals; the deal has to go through because it is the only alternative to insolvency.

Vanni Treves, the chairman of Equitable, says that without the compromise the future is "very bleak". He isn't bluffing. Rejection means only guaranteed payouts will be made in future, with no further bonus declarations and minimal surrender values.

You might feel like being bloody-minded and voting no. After all, many longstanding policyholders have been messed about by Equitable, and stand to lose out on considerable sums of money.

But with no other options, the best move is to vote yes. Then, if you have more than a couple of years until retirement, it would be wise to think about taking what's left of your funds and leaving the society.

The only downside is that the market value adjuster (MVA) is likely to remain for some time to stop you doing precisely that. But find out how much it would cost you to switch (even allowing for an MVA), because it just might still be worth it in the long run.

m.bien@independent.co.uk