Equitable Life: Future pensions to increase
- 28 March 2011
- From the section Business
Some 400,000 existing policyholders with the Equitable Life are to get an increase to their future pensions, the society has said.
Those who start drawing their pensions from 1 April will get a 12.5% rise in the payments they receive on retiring.
The extra funds have come from the reserves that the Equitable has built up by moving to safer investments.
It comes on top of compensation to be paid to all those who lost money when the firm came close to collapse.
The extra payouts will only be made to those who are still saving with the Equitable.
So those who have retired before Friday, as well as those who have transferred their policies elsewhere will not qualify.
All of those who qualify will receive a letter from the society outlining the details.
The Equitable said that the large sums of capital were no longer needed to cover stock market risks, and so could start to be repaid to policyholders.
Many of these customers would have lost money when the Equitable came close to collapse 10 years ago, and have suffered uncertainty over the chances of receiving compensation - and the amount that might be - ever since.
"These policyholders have had the most traumatic decade. They want as much certainty as they can possibly get as they plan for their retirement," said Chris Wiscarson, Equitable Life's chief executive.
"Declaring this now is a step forward to help them with their lives."
In the next few weeks, the government is set to announce the exact details of compensation for all those Equitable Life policyholders who lost money when the society hit financial problems.
About 945,000 policyholders are expected to share £775m, repaying them 22% of their "relative losses".
Last year, the government decided that potentially 1.5 million savers should share compensation of £1.5bn.
Of that, it has already been decided that £620m will be paid to 37,000 with-profits annuitants.
About 100,000 policyholders are likely to receive nothing as the pro-rata compensation payments due to them are less than £10 each and, so, are less than the administrative cost of making the payments.
There are a further 435,000 policyholders who are not eligible for any compensation at all because the government has judged that they have not suffered any losses.
Policyholders have been told they do not need to do anything yet to receive the payments. A practical scheme for making the payments, including a timetable, is being devised.
It will be published in the coming weeks and the government has already said that it intends to start making payments in the middle of this year.
It has been recommended that the payments be spread over three years and it has been agreed that the oldest policyholders will be paid first.