Dispute over annuity rates hits Equitable

EQUITABLE LIFE, the UK life insurer, is facing angry complaints and possible legal action over its approach to annuity guarantees designed to protect pension savers from disappointing retirement incomes.

A group of pension savers are pursuing complaints about Equitable through the PIA Ombudsman, the body that investigates individual complaints against life offices. Some may take the issue to the courts.

They are complaining about pension policies which included a guaranteed minimum annuity rate, which promised a minimum rate of income from their savings on maturity.

Annuity rates determine the level of income a saver will get from their fund on retirement. The annuity rate - and the income - depends on the yield on government gilts, which fluctuate as markets rise and fall. By guaranteeing a minimum rate, life offices sought to reassure savers that their income would be protected.

But the policyholders say Equitable's policies are failing to do that, at a time when the markets are offering one of the worst annuity rates available.

Some Equitable policies, issued more than 10 years ago, offered to guarantee annuity incomes at more than 10 per cent of the fund, so pounds 100,000 would pay out over pounds 10,000 a year, compared with around pounds 7,000 on the open market.

But Equitable has told savers they cannot get a guaranteed rate for their entire pension saving. If they want the guaranteed rate, they will forego part of their terminal bonus, a sizeable chunk of their fund .

Equitable says it has always made this clear in its contract. Nigel Webb, spokesman for the society, said the guarantees were always a choice between a guarantee for part of the fund (consisting of premiums plus annual bonuses) or a market rate for all of it. But policyholders say they were never made properly aware of this.

The recent turmoil in financial markets has caused a flight of money from shares to gilts, forcing gilt prices up, causing yields to fall to an all-time low and annuity rates to plunge.

The annuity specialists, Annuity Bureau, says a typical saver retiring with pounds 100,000 can now get just pounds 7,040 a year, compared to pounds 13,280 in 1990.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test