Insurer Equitable Life is to shut down next year, closing its With Profits Fund, it has announced.

The firm’s new strategy will see all policy holders transferred to Reliance Life, part of the of the LCCG Group, in a £1.8bn deal that could see 261,000 policy holders receive an extra 35 per cent uplift in their policy, generating an average windfall of £6,900.

According to Aon, the news is a prompt for defined contribution trustees to review their scheme arrangements to get better value and better outcomes for their members.

Aon principle consultant, John Foster, said: “This should also be an opportunity for trustees to take a step back and revisit their overall strategy for legacy DC and AVC providers, including whether to consolidate them with more up-to-date facilities, or whether to move them out of the scheme altogether.

“Recent changes to regulations on bulk DC to DC transfers give an additional degree of flexibility that trustees can now take advantage of when considering their options on legacy DC and AVC arrangements - such as those held with the likes of Equitable or in other traditional insurance products.”

Eligible policyholders will vote in mid-2019 on whether to approve removing policy guarantees and on the arrangements to transfer to Reliance Life.

Equitable Life chairman, Ian Brimecome, said: “While it will be sad to bring an end to the oldest mutual assurer in the world, the potential to enhance with profits policy values to the extent made possible by a transfer to Reliance Life is fundamentally helpful in distributing capital to our policyholders as fairly and as soon as possible.

“I believe Reliance Life’s approach to customer service, investment choice and policyholder security make for a compelling way forward.”

According to Hargreaves Lansdown chartered financial planner, Danny Cox, the policyholders will have to wait for the “wonderful windfall” but that it is well worth hanging on for.

Cox said: With Profits funds fell out of favour around the turn of the century, when Equitable almost collapsed and the entire sector had to slash policy values as markets tumbled. As a result of the shakeout these funds shuffled their portfolios into bonds in order to reduce risk.

“Loose monetary policy has helped to boost the value of these fixed income assets, which has now prompted Equitable to lock in these gains for policyholders.”

Share Story: