Changes to surrender and maturity values

Equitable Life Assurance Society has increased the financial adjustments applied to surrender and maturity values with effect from today (1 July 2002).

Further falls in equity values, continued market volatility and likely increases in provisions have led the Society to take this entirely necessary, yet most regrettable, action to improve the financial stability of the with-profits fund.

The financial adjustment for early surrenders moves from 14 per cent to 20 per cent. The maturity value for policyholders choosing to take benefits will be reduced by 10 per cent, previously 4 per cent, unless this takes the value below guaranteed value, in which case the guaranteed value will be paid.

Vanni Treves, Equitable Life's Chairman, commented:

"The Society is solvent and we continue to meet our regulatory capital requirements. The Board's primary objective is to act in the best interest of continuing policyholders. To do this we must ensure the Society remains solvent and that the policyholders choosing to leave the fund do not take more than their fair share. We understand this is unwelcome news for those who choose to go now but the Board would be failing in its duty if we did not act."

Despite the Society having reduced its equity holding to 15 per cent, recent market falls have significantly impacted the value of the fund. In addition, the Board's close monitoring of the financial position of the with-profits fund has led it to conclude that it would be prudent to make further provisions, particularly as a result of the Society's inability to reduce administrative expenses arising from outsourcing arrangements demanded by the current climate. Changes to provisions will be detailed in the Society's Interim Accounts, for the half-year ending June 30 2002, to be published in the Autumn.

The Society will be writing to policyholders this week to explain these changes. Policyholders surrendering or maturing whose completed forms have already been received by the Society before 1 July 2002* will have the previous surrender or maturity values applied.

Updated surrender and maturity values will be available on request to policyholders from tomorrow (2 July 2002).

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* Please note that in order to obtain a maturity value at the rates prior to those introduced today, the maturity date must also be before 1 July 2002.