Bonus cut 'could lose Equitable £2bn in a month'

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The level of policyholders leaving stricken Equitable Life's with-profits fund could be accelerating to the point where the same amount of money is wiped from the fund's value in one month as was lost in the first six months of this year.

Equitable's fund may be reduced by £2bn in the month after 16 July, when it announced it would cut policy values by up to 16 per cent.

This was the prediction of Stuart Bayliss, director of Annuity Direct and one of the closest industry figures to Equitable's predicament.

If the with-profits fund does lose £2bn of business within a month, this would be the same sum as was taken out of the fund between January and June. Mr Bayliss said: "Looking at the volumes of business we are advising on, I feel very safe in saying that it will be the same level applying to leave the fund in July as in the first six months."

The revelation that Equitable has lost £2bn so far this year – or 8 per cent of the fund's total value – itself shocked the market. The possibility that the same substantial chunk will go from mid-July to mid-August will prompt renewed fears about the viability of the fund continuing to operate.

Charles Thomson, chief executive of Equitable, yesterday emphasised that the fund was solvent. Some independent advisers say that last month's 16 per cent cut means that Equitable has boosted its reserves more than most other life offices have been able to do in recent tough stock market conditions.

Equitable said that the £2bn cashed in the first half of the year was divided between those surrendering early and those whose polices were maturing according to planned dates.