Topping up pensions
Equitable Life has a sizeable group life and pensions portfolio and was a major writer of additional voluntary contribution (AVC) top-ups for members of a wide variety of group pension schemes. It covers about 700,000 lives in pension schemes, around two-thirds of whom have AVC plans; of these, 80% are in the with-profit fund. There are 100,000 members with GAR policies. Equitable was a logical choice for pension scheme trustees and for scheme members, especially where AVCs were concerned. The company was renowned for its efficiency and solid performance, and it vigorously courted AVC contributions as an adjunct to its other corporate business.
Equitable’s current policy is that group plans will pay full value for immediate retirement or death benefits, or where a transfer value is paid within a year of leaving service provided the transfer value is under £100,000. But otherwise individual withdrawals of with-profit funds by group scheme members are subject to the same 10% financial adjustment as other planholders.
If trustees decide to switch or transfer all members’ assets out of the with-profit fund, an adjustment will also be applied, though this could be higher or lower than 10%. The rationale is that the 10% applying to individuals is a convenient universal figure that avoids numerous single calculations. But for groups a special calculation will be made reflecting size, contribution history and other factors with the aim of maintaining equity between withdrawing and remaining members. So far there have been wholesale withdrawals by two schemes involving assets of £2.7m and 290 members.
To allow trustees to consider whether they wish to remain invested in the with-profits fund, the society is allowing them to switch contributions to the Money Pension Fund in respect of the period from December 2000 (when the closure to new business was announced) to March 2001. The final decision need not be made until the latter date, although the right to exercise the option needed to be notified by late January.