Equitable Life has assured the UK's National Association of Pension Funds (NAPF) that the chances of further crises for policyholders has been greatly diminished by recent reductions in policy values.
Following discussions with Equitable and the Financial Services Authority, the NAPF also confirmed Equitable’s solvency, adding that a further “substantial” fall in equity markets would be necessary to threaten this position.
NAPF chairman, Peter Thompson, said: “The issues facing trustees with Equitable with-profit policies are very complex, and are exacerbated by understandable concern from scheme members who have seen the value of their with-profits policies cut yet again. It is now more than ever important that trustees take advice from their pension scheme advisers as to the most appropriate course of action to be taken.
“Equitable have stressed to us that the bulk surrender calculation basis used, and therefore the bulk surrender value payable, would be the same now as had been the case – under the same market conditions - before the recent announcement of a cut in policy values. This basis does, of course, include an allowance for market conditions but, in principle, a bulk surrender should be neither more nor less attractive now than it was before the recent announcement.”
Thompson said that Equitable is working towards a compromise proposal, which it expects to publish in August, to resolve the Guaranteed Annuity Rate (GAR) issue.
“The NAPF will take a close interest in the compromise proposal, when this is published, and at that point we may commission independent legal advice if we feel this could be of use to our members,” he said.
“Trustees can only act on legal advice provided by their appointed legal advisers but, nevertheless, we hope that any opinion made available to members by this association will be of help to trustees in their deliberations on this complex issue.”
By Janet Du Chenne
This week's edition of Professional Pensions is out now.
The government is in talks with the UK and Irish pensions regulators over how to protect members of cross-border schemes in the event of a no-deal Brexit.
The equalisation of guaranteed minimum pensions (GMPs) is at least two years away from being completed, and could take longer than four years for some schemes, a poll has found.
The Pensions Regulator will consider if schemes should be required to have professional trustees and assess the case for greater regulation of administrators and system providers, PP can reveal.