Helpful Questions and Answers

Q1. What are the fund and guaranteed values?
  • The fund value, which includes capital distribution on the with-profits investment, is the amount a policyholder receives when taking their savings. With-profits policies also have a guaranteed value which is the minimum amount payable on retirement, maturity, death or at a time specified in the policy. If the Proposal goes ahead, this guarantee and any annual increases will cease. The fund value and the guarantee as at 1 April 2018 can clearly be seen on Annual Statements.

Q2. What do you mean by capital distribution?
  • Capital is the money a company needs to hold to protect itself against things going badly wrong that could otherwise lead to insolvency. The amount of capital we have to hold depends on the level of risks faced by the Society. As risks are reduced, capital is freed up which can be returned to with-profits policyholders, which is capital distribution. The Society is determined to return capital to with-profits policyholders as fairly and as soon as possible, and the Proposal aims to achieve this.

Q3. What happens if the high asset values fall before the vote?
  • We have taken out insurance to substantially protect asset values from any reduction following interest rate rises. This will provide protection in supporting the expected 60% to 70% capital distribution range.

Q4. Why can’t you give the exact size of the uplift now?
  • If the Proposal goes ahead, the actual uplift could depend on a number of factors and, in particular, financial conditions when all the necessary legal steps have been taken. There is a possibility that the final uplift may be less than 60% or more than 70% based on 31 December 2017 values as compared to the current 35%.

Q5. If the Proposal goes ahead, what will savings be invested in after the transfer to Utmost Life and Pensions (formerly Reliance Life) ?
  • Following closure of the with-profits fund, policyholders will have a choice of unit-linked funds managed by Utmost Life and Pensions. Before the vote, we will provide information on the funds available. Unit-linked funds present different risks and rewards, and an Independent Financial Adviser can help in choosing the right fund. When we write in the summer, we will provide information to help policyholders consider the Proposal and understand the decisions they have to make.

Q6. What happens if not enough policyholders vote in favour of the Proposal?
  • The Proposal would not proceed, policyholders would not receive the additional uplift, and we would return to running off the Equitable over the next 20 years. While we have been able to increase fund values steadily over the last few years, we cannot guarantee this will always be the case; if the fund value were to fall, no less than the guaranteed value would be payable.

Q7. What happens if a policyholder leaves before the values are uplifted?
  • The opportunity to increase the current 35% capital distribution to a level expected to be between 60% and 70% would be lost. Policyholders should exercise great care before taking benefits in advance of the proposed uplift and an Independent Financial Adviser may help with this decision. One important consideration, where there is an urgent need for cash, is to draw down only a portion of savings. Most pension policyholders over age 55 are able to make withdrawals of £1,000 or more, leaving the balance of their with-profits fund to benefit from the uplift if the Proposal is implemented.

Q8. What will happen to any existing unit-linked funds I hold with Equitable?