Money: Q & A - Does Equitable's case affect me?

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The Independent Online
I have some self-employment income from royalties and each year for the last 10 years I have contributed towards a personal pension with Equitable Life. The next payment falls in early July. Equitable is currently involved in a court case, the possible ramifications of which I don't understand. Would I do better to look for another pension company ?

NM, London

It sounds as though you buy a new pension policy with a single premium each year, as opposed to having a regular monthly premium contract. In that case, why choose the same company every time? It would be sensible to spread the investment risk rather than putting all your eggs in the Equitable basket.

The issue at stake with the current court case is whether Equitable Life has properly honoured annuity guarantees given to policyholders at a time when low annuity rates were not foreseen. Equitable Life is giving lower bonuses to policyholders who exercise the guarantee, higher bonuses to those that do not exercise it. This would appear to make something of a mockery of the guarantee. The company could get into difficulties, and policyholders' returns could be affected if the insurance company loses the court case.

It is, of course, fairly easy to put money with different companies if you take out single premium policies. By contrast, the traditional regular premium policy carries stiff penalties if you stop making regular premiums. This makes the single premium plan safer. You may pay a little more in the long term with single-premium policies. However, you can lose out very badly if you fail to keep a regular premium plan going.

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