Equitable clients still paying pension AVCs

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The Independent Online

Equitable Life, the troubled insurer, is still receiving additional voluntary contributions (AVCs) from pension scheme members nearly two years after it closed to new business.

Equitable Life, the troubled insurer, is still receiving additional voluntary contributions (AVCs) from pension scheme members nearly two years after it closed to new business.

Research published today in Occupational Pensions shows individual employees are still putting money into the perilous with-profits fund, ignoring communications sent by pension administrators explaining the risks involved.

Of the 25 occupational pension schemes surveyed, the with-profits fund was found to remain open to 16. Three schemes allow new AVC contributors to pay money in, although no members have taken up this offer. Only one respondent has transferred members' funds to an alternative provider.

"Trustees who operate occupational pension schemes are understandably nervous about making decisions on behalf of their members, which is why many have left the Equitable funds open to contributions," says Charlotte Wolff, the author of the research. "However, in terms of comeback there may be a greater risk of members criticising trustees if the Equitable option is left open."

The insurer's problems began in July 2000 after a House of Lords ruling that it was not entitled to cut the bonuses of policyholders with guaranteed annuity rates. The increase in the insurer's liabilities created a black hole in its finances, leading to the erosion of the value of policyholders' funds and bonuses and an increase in exit penalties. The group closed to new business in December 2000.

Before its downfall, Equitable was the largest recipient of AVCs in the UK.

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