AVC NEWS
Important
Information: Update on AVCs for members invested in the Equitable Life Building
I note from our records you hold investments in the
Equitable Life Building Society Fund.
As you are aware the Equitable Life Building Society
Fund has been managed by Halifax Life since 2001. Halifax Life has been
advised by Nationwide Building Society (with whom Equitable Life Building
Society invests), that Nationwide Building Society has withdrawn from the AVC
market from the end of February 2008.
Equitable Life has agreed that the funds currently
held in their Building Society Fund can be transferred to the Bank of
Scotland. Neither Equitable Life nor Bank of Scotland will make any
charge in respect of such transfers.
The Bank of Scotland deposit account provides capital
security and a return linked to the Bank of England Base Rate. The
account was compared with a number of similar accounts available in the market
which confirmed that the rate available on the Bank of Scotland’s account
(currently 5%) is in line with or greater than many similar accounts.
The account offered by Bank of Scotland is a Corporate
Deposit Account with the following features:
- Minimum
balance of £1
- Credit
Interest rates linked to Bank of England Base Rate
- Same
day access to funds
- Interest
rate paid on full balance
- Interest
calculated daily on cleared balance and paid to account on last business
day of the month
- No
exit penalties
Equitable Life are also taking this opportunity to
rename the Building Society Fund to more accurately reflect its purpose.
With immediate effect it will be known as the Equitable Life Deposit Account
Fund, and their documentation and outputs will be amended over the coming
months to reflect this change.
There is no need for you to take any action regarding
this change, although you should satisfy yourself that the Deposit Account Fund
is the correct option for any AVC investment you have previously held in the
Equitable Life Building Society Fund.
Prudential, our other in-house AVC provider also has a
Deposit Fund investment option available. The enclosed leaflet explains
and provides an understanding of the Prudential Deposit Fund. The current
Prudential Deposit Fund rate is 5% gross per annum. This fund currently
tracks the Bank of England base rate.
If you wish to transfer your AVC fund from Equitable
Life to Prudential please contact Carole McSherry on
It should be noted, however, that there is no
guarantee that our other AVC provider, Prudential, will perform better than the
funds available through the Equitable Life policy. I would add that we do
review the fund performance of Prudential on a regular basis.
Prudential AVC Info rmation
Note - July 2006
Dear Member
Announcement to Members with Additional Voluntary
Contributions (AVCs) held in Prudential Funds
The Committee, in consultation with
its advisers, Hewitt, Bacon and Woodrow, has recently completed its annual
review of the Scheme’s AVC arrangement with Prudential. The Committee is happy
to retain Prudential as its AVC provider. This letter is to inform existing AVC
members of information arising from that review which may influence your
investment decision.
The letter includes the details of
the risk ratings and management charges for all of the AVC funds (Annex A). In
conjunction with this list, and the performance report you will have received
directly from the Prudential, you may wish to ensure you are content with the
fund you invest in.
In addition, this letter includes
specific information on the following funds (Annex B):-
|
Fund Type |
Summary of |
|
Prudential With-Profits Fund |
Advisers feel that
With-Profits funds in general are not transparent and have higher management
charges |
|
Prudential Deposit Fund |
This fund is not a Building
Society type cash fund as the name might suggest but is part of the
With-Profits fund |
|
Deutsche Asset Management (now known as
Aberdeen Asset Management [AAM]) Funds |
Advisers have concerns
over the fund managers' performance and investment processes |
|
Prudential Passive Funds |
Advisers have concerns
about the investment process |
Making Investment Decisions
As with any choice of investments,
no one can predict with certainty which fund will offer the best return. When you
compare Prudential’s funds, you need to decide which investment is most
suitable for your needs. Often this will depend upon how near or how far you
are from retirement.
- Bonds and cash are often used to help protect the
value of investments for members closer to retirement, as bond prices move
broadly in line with the cost of pensions and members generally take part
of their fund as cash.
- Members who are not close to retiring might
consider investing mainly in shares. Historically, shares have produced
higher returns than other types of investment. But, the value of share
investments can go up and down quite sharply, especially in the short
term.
Any investment decision is a personal one, reflecting
your financial circumstances, approach to investment and attitude to risk. If
you are in any doubt, you are recommended to get independent financial advice.
The Committee and its advisers cannot give you financial advice. If you do not
already use a financial adviser, IFA Promotions can give you details of an
independent financial adviser in your area. You can contact them at:
IFA
Promotions
Limited
Tel 0117 971 1177 or 0800 085
3250
Brislington
Email: ifap_mail@orchestrabristol.co.uk
Bristol
BS4
5PF
Internet: www.unbiased.co.uk
If you require more information,
the NILGOSC Members’ Team will try to answer your questions, but please
remember that they cannot give you financial advice about your investments.
They can be contacted on 028 9076 8025 or by email at info@nilgosc.org.uk
Fact sheets on each of the funds
offered by Prudential are available on its website at:
www.pru.co.uk/content/memberfactsheets/.
If you wish to change your
investment, please contact the Prudential Customer Service helpline on 0845
6000 343.
The transfer value of your funds
will be based on the value of the units you hold on the date of transfer. There
may be a small cost involved in the transfer of your units, which reflects the
cost of trading in the underlying investments rather than being an explicit
charge levied by Prudential for making the change. Overall, you should not
notice any cost associated with transferring, unless Prudential introduce a
Market Value Reduction (MVR) to transfers from the With-Profits Fund, in which
case you will be advised of the amount of the MVR before making a final
decision to transfer.
Yours sincerely,
Lynda
White
Lynda White (Mrs)
Pensions Manager
----------------------------
Annex A
Available Prudential Funds
The funds currently available under
the LGPS(NI) AVC Scheme and their annual management charges are listed in the
table below. Prudential intends to make additional funds available later in the
year, which the Committee will assess and decide whether to add them to the
options available under the Scheme.
Fund
|
Risk Rating
|
Ann Mgt Charge
|
|
Funds refered to in Annex B |
|
|
|
Prudential
With-Profits |
Medium |
1% ** |
|
Prudential
Deposit |
Low |
n/a * |
|
AAM Balanced
Managed ex Property |
Medium |
0.85% |
|
AAM North
American Equity |
High |
0.85% |
|
AAM |
High |
0.85% |
|
Prudential
Long-Term Growth Passive |
High |
0.65% |
|
Prudential
Overseas Equity Passive |
High |
0.65% |
|
Prudential
Pre-Retirement Passive |
Low |
0.65% |
|
Prudential
Retirement Protection Passive |
Low |
0.75% |
|
Prudential |
High |
0.65% |
Equity funds
|
|
|
|
BGI (60/40)
Global Equity Index |
High |
0.75% |
|
BGI |
High |
0.75% |
|
Prudential Equity |
High |
0.75% |
|
Prudential |
High |
0.75% |
|
Prudential Global
Equity |
High |
0.75% |
|
Prudential
International Equity |
High |
0.75% |
|
Prudential
Socially Responsible |
High |
0.75% |
Bonds and fixed interest
securities
|
|
|
|
Prudential Fixed
Interest |
Low |
0.75% |
|
Prudential
Index-Linked |
Low |
0.75% |
|
Prudential
Corporate Bond |
Medium |
0.75% |
Other
|
|
|
|
Prudential
Discretionary (mostly equities, some bonds and cash) |
Medium |
0.75% |
|
Prudential Cash |
Low |
0.75% |
|
Prudential
Property |
High |
0.75% |
|
Lifestyle Options |
High |
variable |
* Prudential does
not apply an explicit charge to the Deposit Fund but instead takes account of
the charge in the interest rate it declares.
** Prudential does not
apply an explicit charge to the With-Profits Fund but instead takes account of
the charge in the bonus rate it declares. This is currently expected to be 1% a
year, assuming future investment returns in the With-Profits Fund are 7% a
year.
There are also three
Lifestyle options which initially invest in the Prudential UK Equity Passive
Fund and switch into the Retirement Protection Fund starting six, eight or ten
years before retirement dependent on which option is chosen. The charge will
depend on which funds you are invested in and the proportion invested in each.
Annex B
Fund
Type: Prudential With-Profits Fund
Historically, this
has been a popular choice with members and the Prudential With-Profits Fund has
provided good returns over the years compared to other with-profits funds.
However, changes in the industry in recent years mean that the way with-profits
funds are now run and the prospects for future bonuses from them are
significantly different than when the fund was first introduced. Historically their objectives were to provide a competitive
level of returns for a long term investment, however there is now a much
greater focus on paying out any guaranteed level of benefits applicable under a
policy rather than trying to generate returns over and above such amounts. This
means that bonus rates on with-profits policies are expected to be lower in the
future than may have been achieved in the past.
One of
the main aims of with-profits funds is to try to give continual investment
returns by smoothing peaks and troughs experienced in investment markets.
Smoothing works by holding back some of the returns when the underlying
performance is good (e.g. when stock markets perform well) and using these to
boost payouts when the underlying performance is poor. During 2005 the gross
investment return achieved by the With-Profits Fund was 20%, whilst the regular
bonus rate was 3%.
However,
there are a number of issues associated with with-profits investing:
- The returns on with-profits contracts are not
guaranteed and may vary, because some bonuses are discretionary.
- With-profits investments can fall in value. Any
poor performance in the underlying investments will ultimately be
reflected in the policy values and bonuses.
- With-profits investments are not transparent,
which means that often members do not know whether they have received or
will receive a fair return on their investment.
- With-profits funds have additional risks which
may be over-looked. For example, the risk that the fund does not have
enough assets to pay the guaranteed benefits. This may arise because the
cost of a guarantee was not expected or it was greater than expected.
- The Scheme’s policy with the Prudential has
guaranteed rates of interest depending on when contributions are paid,
which is detailed in the table below. Contributions paid before 1
April 1996 receive a minimum rate of return of 4.75% per annum until the
benefits are taken at retirement, but the guaranteed interest rate on contributions
paid after 6 April 2003 is only 0.01% per annum. These guarantees only
apply if the benefits are taken at normal retirement and do not apply to
transfers.
|
Date contributions paid |
Guaranteed rate of interest (p.a.) |
|
Before 1 April 1996 |
4.75% * |
|
Between 1 April 1996 and 5 April 2003 |
2.5% |
|
After 6 April 2003 |
0.01% |
* Few, if any, members of the LGPS(NI) qualify for this rate.
From 15 March 2006 the
regular bonus is 3% p.a. on the part of your fund not entitled to the
guaranteed rate of return of 4.75% p.a. There are no penalties for ceasing
contributions.
A Market Value Reduction (MVR) may
apply in future on switches out of the Prudential With-Profits Fund, although
Prudential told us that on 28 March 2006 an MVR would not have been
applied. MVRs are widely used by with-profits funds to ensure that payouts are
not excessive to particular members or groups of members. They are calculated
on a daily basis and the situation could therefore change. If you decide to
transfer your fund, Prudential will inform you before disinvesting if an MVR is
to be applied and give you the option to change your mind.
Since 2000
Prudential has reduced the proportion of equities held in its With-Profits
portfolio from 70% to 59% at the end of 2005.
Fund Type:
Prudential Deposit Fund
The Prudential
Deposit Fund appears similar to a building society account, in that it pays a
fixed rate of interest on your investment. However, it has been brought to the
Committee’s attention that the Prudential Deposit Fund is not a ‘stand alone’
fund but is in fact a part of the Prudential’s With-Profits Fund.
The Prudential With-Profits Fund is
one of the stronger with-profits funds in the market. However, the underlying
assets in the With-Profits Fund (and thus the assets supporting the cash in the
Deposit Fund) are mainly equities and bonds and therefore this slightly
increases the risk associated with the fund as compared to a normal building
society fund. However, to put the position into perspective, the Deposit Fund
as at 31 December 2004 amounted to approximately £120 million out of the total
With-Profits Fund of £60,000 million (i.e. 0.2% of the With-Profits Fund). Although
the risk is slightly higher, the returns produced by the Deposit Fund as shown
in the following table, have been higher than the average (median) cash fund in
a survey carried out by the Committee’s advisers. The first bar shows the
performance of the Prudential Cash Fund, which is similar to a building society
account and therefore slightly less risky than the Deposit Fund, over the same
periods.
The Committee’s
advisers do not currently envisage any problems with the Committee retaining
the investment in the Deposit Fund, but it is only right that you should be
made aware of these issues.
Fund Type: Deutsche Asset Management
Funds (DeAM)/
Specific
Fund Names
AAM Balanced Managed Ex Property
AAM North American Property
AAM
The Committee’s
advisers have had long-held concerns about DeAM which include concerns about
how investment decisions are made, the regular changes made to the investment
process in an attempt to improve performance, and the significant staff
turnover that it has experienced. It also believed that some portfolio managers
had lost confidence in their abilities and in the DeAM research base.
On 30 September 2005 Aberdeen Asset
Management (AAM) completed the purchase of the majority of DeAM
Fund
Type: Prudential Passive Funds
Specific
Fund Names
Prudential Long-Term Growth Passive
Prudential Overseas Equity Passive
Prudential Pre-Retirement Passive
Prudential Retirement Protection Passive
Prudential
A passive fund aims to perform in
line with the index it tracks. The ability of passive managers to achieve their
objectives rests mostly on the size of the assets involved. The larger the pool
of assets, the easier it is to achieve close tracking of market indices and
keep costs down. Prudential’s passive management operation is small and the
investment process used is more reliant on the manager’s stock picking ability,
as the fund is not big enough to fully replicate the index or to sufficiently
reduce costs. The Committee’s advisers’ research has led them to believe that
Prudential’s stock picking includes an element of active stock selection which
is against the philosophy of passive management. There are also concerns about
the effectiveness of the risk management controls and that performance is
unlikely to track the index over either the short or long term due to these
concerns.
This update gives
our advisers’ understanding of the situation at March 2006. Features and issues
will change without notice. It has been based on information that is available
to the public, research conducted by our advisers and other information
believed to be reliable. This update gives an overview of the situation at
Prudential to help you, but you should not take it as financial advice.
Additional
Voluntary Contributions Info rmation
Note – September 2005
We have recently
been notified by Equitable Life of a change in the interest rate applicable to
their Building Society Fund.
With effect from 1
September 2005 the rate of interest applicable to the Equitable Life Building
Society Fund changed to 3.85% gross per annum (3.89% annual equivalent rate).
The Local Government
Pension Scheme (
If you are
interested in transferring your AVC funds to the Prudential please contact the
NILGOSC Members Section on 028 9076 8025 and you will be sent the appropriate
forms for completion.
EQUITABLE LIFE INFORMATION NOTE – JUNE 2005
Dear Member
Important information: Update on Equitable Life AVCs
for members invested in the With Profits, Managed, Lifestyle and/or Deposit
Fund
This note contains important
information relating to your Additional Voluntary Contribution (AVC) plan with
Equitable Life so please take some time to read through the information and
contact us with any queries.
1. Annual Statement
Your annual benefit
statement is enclosed for your attention. This will detail any contributions
paid during the last 12 months, the notional value of your AVC fund and the
transfer value available at 1 April 2005.
2. Latest
information from our investment adviser
NILGOSC has received
the latest views from our adviser, Hewitt Bacon & Woodrow, following the
publication of Equitable Life’s annual report and accounts for 2004. The key
points are: -
- Equitable Life’s future solvency is not
guaranteed as it has raised money in the financial markets by taking out a
loan to meet the solvency requirements. This will have to be repaid in the
future.
- Equitable Life faces the risk of heavy legal
costs in connection with a claim from 421 with-profits annuitants, 1100
mis-selling claims currently with the Financial Ombudsman Service and a
court case against the former directors and auditors.
- The fund is much smaller than it was and is
continuing to shrink. The risk increases as it shrinks as there are fewer
policy holders and assets to spread the risk across.
- If the value of the fund falls in future and
there is no reduction in the amount of money that needs to be paid out to
policyholders, Equitable Life may have to reduce the value of your policy.
- It is not only with profits investments that are
at risk. Members with investments in the Managed Fund, Lifestyle and
Deposit Fund are also at risk if Equitable Life becomes insolvent.
Our advisers have therefore recommended that:
No further contributions to any of the Equitable Life funds should be
made with immediate effect. Most members have already re-directed
their contributions to our alternative AVC provider, Prudential, and we will be
happy to assist you to do this if you wish to continue to pay AVCs.
Investors in either the Managed Fund or Deposit Fund should seriously
consider transferring these to one of the Prudential funds. Prudential
will make no initial charge for receiving such transfers and there will
be no penalty applied for transferring by Equitable Life. The current interest
rate payable on the Deposit Fund with Equitable Life is 4.1%. The Prudential
Deposit Fund currently pays a rate of interest in line with the Bank of England
base rate which is 4.75% per annum. This current practice is not guaranteed.
With Profits investors, especially those who are some years away from
retirement, should also consider transferring to one of the Prudential Funds.
Equitable Life will reduce your policy value
by 11.1% if you transfer. However if you remain with Equitable Life, the
Society has stated that “no provision is made for future discretionary bonuses”
and “it is the Society’s intention that any future bonuses will be in a
non-guaranteed form.” Future returns on your investment are therefore likely to
be limited if you continue to invest with Equitable Life.
It should be noted however that there is no guarantee
that our AVC provider, Prudential, will perform better than the funds available
through the Equitable Life policy. We review the fund performance of Prudential
on a regular basis and since their appointment in 2001 their performance has
been satisfactory.
3. What happens next – action required by you
If you
are still making regular contributions to Equitable
Please complete the
attached option form to show which option you wish to take. Your
contributions to Equitable Life will continue unless you instruct us otherwise,
however we suggest that you seriously consider our adviser’s concerns about the
risk of continuing payments to Equitable. If you wish to re-direct future
AVC payments to Prudential please show this on the option form and you will be
contacted separately to arrange completion of the Prudential application form
and to provide information that will help you decide in which of their funds
you wish to invest.
If you
have an existing fund with Equitable
We will not automatically transfer your current fund with
Equitable to Prudential however we suggest that you seriously consider our
adviser’s concerns about the risk of leaving your AVC investment with
Equitable. If you wish to transfer please tick the transfer box on the enclosed
form and return it to us by 30th June. You will then be
contacted to arrange completion of the Prudential application form and to
provide information that will help you decide which of their fund you wish to
invest.
If we do not receive your completed form, we will assume
you have decided to leave your AVCs with Equitable Life.
You can
transfer your AVCs at any time to our alternative AVC provider. The transfer
value is not guaranteed and will be based on the terms at that time. Equitable
Life can change these terms at any time without notice.
Finally it is
important that you read the notes at the foot of this page. We will keep
you informed of any further developments.
Yours sincerely
DW Morrice
Fund Secretary
Notes
This update gives our advisers’ understanding of the situation at May
2005. Features and issues will change without notice. It has been based on information
that is available to the public, research conducted by our advisers and other
information believed to be reliable. This update gives an overview of the
situation at Equitable Life to help you, but you should not take it as
financial advice.
Getting further help and advice -
The Financial Services Authority (FSA) website has further information on
Equitable Life, including some useful questions and answers. You can find out
more by visiting the FSA website at:
www.fsa.gov.uk/consumer/10_whats_new/firms/equitable/decision/page1.html
The Committee and its advisers cannot give
you financial advice. You are recommended to get independent financial advice. If you do not already use a financial
adviser, IFA Promotions can give you details of an independent financial
adviser in your area. You can contact them at:
IFA Promotions
Limited
Tel 0800 085 3250
17 –
Brislington
Email: ifap_mail@orchestrabristol.co.uk
BS4 5PF
Equitable
Life AVC Option Form
Please underline the Statement(s) which express your
wishes and return this page to NILGOSC, Members’ Section,
1. I acknowledge receipt of your letter
dated………………………………………
2. (Current contributors only)
I acknowledge the advice received from the Pension Scheme’s adviser but I
wish to continue paying AVCs to Equitable Life.
I wish to cease AVC contributions to Equitable Life and would like to
re-direct future AVC contributions to Prudential.
I wish to cease AVC contributions to Equitable Life and do not wish to
make any further AVC contributions.
(Existing funds) I acknowledge the advice received from the Pension
Scheme’s adviser and wish to do the following:
Transfer my Equitable fund to Prudential
or
Leave my fund with Equitable, however I accept the risks of doing so
If I have underlined options 2(b) and/or 3(a) I acknowledge that NILGOSC
will now proceed with informing Equitable Life accordingly on my behalf. I also
acknowledge that I will be contacted in order to arrange completion of the
application form for Prudential.
I understand that
any transfer out of the Equitable Life With-Profits Fund may have a financial
adjustment applied to it. This can change and the transfer value is not
guaranteed. At May 2005 the transfer value was 88.9% of my policy value.
Signature_____________________________________
Date ___________________
Contact
details for follow up contact to complete new application form
NILGOS Reference number:
Name:
Address:
Employer:
Daytime contact telephone number:
__________________________
Evening contact telephone number:
__________________________
EQUITABLE LIFE INFORMATION NOTE – DECEMBER
2004
BUILDING
SOCIETY FUND INTEREST RATE CHANGE
Please note the following changes to the rate of interest
applicable to The Equitable Life Building Society Fund:
Applicable
date 1
September 2004
Rate changed
to 4.10%
gross per annum
4.14% (annual equivalent rate)
EQUITABLE LIFE INFORMATION NOTE – AUGUST
2004
05 August 2004
BUILDING
SOCIETY FUND INTEREST RATE CHANGE
Please note the following changes to the rate of
interest applicable to The Equitable Life Building Society Fund.
Applicable date 1 June 2004
Rate changed to 3.60% gross per annum
3.63% (annual equivalent rate)
Applicable date 1 July 2004
Rate changed to 3.85% gross per annum
3.89% (annual equivalent rate)
EQUITABLE LIFE INFORMATION NOTE – JUNE
2004
16 June 2004
EQUITABLE LIFE INFORMATION NOTE – JUNE
2004
AVC LIFE COVER
Further to previous information notes on Equitable
Life I have indicated that there is uncertainty whether Equitable Life can
continue to meet the FSA’s solvency requirements in the future. Our
advisers have now stated that should Equitable Life become insolvent then any
Life Assurance with them is likely to cease.
Current Cover with Equitable Life
Sum
Assured
£
Annual
premium
£
Alternative Cover
You have a choice whether to continue with your
current arrangement with Equitable Life or to select an alternative method of
providing this cover (up to a maximum of 2 times pensionable pay under pensions
legislation). Cover may be provided by Prudential, the other in-house AVC
provider, subject to satisfactory completion of a detailed questionnaire.
Prudential may require further investigation of any existing medical
condition. Details of the cost of Prudential’s comparative cover are
listed below. However, we recommend that you speak to an
independent financial adviser who can provide quotations for the same level of
cover in a variety of different types of contracts.
Potential Problems with switching from Equitable Life
AVC Life Cover
- Equitable
Life has very competitive premiums – a switch will probably increase
premiums for the same sum assured.
- Very
few insurers offer a voluntary life assurance policy.
- A
new provider will require a health assessment to be completed - this may
result in a large premium increase or no cover being offered (if health
has deteriorated since the policy was taken out with Equitable Life).
Prudential AVC Life Cover
Prudential provide AVC life cover through the in house
AVC. However, it should be noted that the premiums for this type of cover
increase, in 3 year bands, as the member ages. This is different from the
Equitable Life contract which has a fixed premium for the life of the contract.
The gross costs for an equivalent sum assured with
Prudential are listed below (these figures were provided to us at 27 May 2004 –
if you have had a birthday since you will need to refer to the costs in the
enclosed Prudential booklet):
Sum Assured
£
Annual
premium £
If you wish to proceed with this life cover please
complete and return the enclosed AVC life cover application form to
NILGOSC. When this cover is accepted by Prudential we will cancel the
Equitable Life cover.
On behalf of NILGOSC
June 2004
This announcement represents our adviser’s
understanding of the position at June 2004. Features and issues are
liable to change without notice. This document has been issued on the
basis of publicly available information, our adviser’s internally developed
data and other sources believed to be reliable. This document is intended
as a strategic commentary and not independent financial advice in respect of
individual members.
EQUITABLE LIFE INFORMATION NOTE – MAY
2004
Equitable Life has published its FSA statutory returns
and Annual Report and Accounts for the year ended 31 December 2003. The
result of the Penrose Inquiry has also been published.
In view of the above our advisers have not changed
their advice to with profits policyholders. However, they have changed
their recommendation for unit-linked investors. In summary:
- No
further contributions should be made to the Equitable Life with profits
fund
- Members
currently invested in the with profits (or lifestyle) fund who are not
close to retirement, should consider transferring their AVC
- No
pension annuities should be purchased from The Equitable Life
- No
further contributions should be made to the unit linked and building
society funds and members should consider moving these assets to an
alternative provider.
In the last update we reported that the unit linked
funds (including the building society fund) remain exposed to the solvency of
the with profits fund. Our advisers have sought guarantees
from Halifax Life (with whom the unit-linked funds are reinsured) that they
will underwrite the value of the unit linked funds in the event of insolvency
of the with profits fund. The request was declined. They also sought
reassurance from the FSA as to the adequacy of Equitable Life’s reserves and
the effectiveness of the reinsurance treaty. No reassurances were
received. Therefore, their conclusion is that there is little benefit to
unit-linked policyholders continuing with Equitable Life.
How
to transfer from Equitable Life
You may transfer your AVC fund from The Equitable Life
to the alternative in-house AVC with Prudential. It should be noted that
there is no guarantee that Prudential will perform better than Equitable Life.
If you are interested in transferring your AVC funds
to the Prudential please contact the NILGOSC Members Section on 028 9076 8025
and the transfer forms will be sent to you for completion.
It should be noted that there will be costs on selling
and repurchasing assets in the unit linked and building society funds.
These costs cannot be quantified in advance as they depend on market values.
A transfer out of the with profits fund will incur a
reduction in fund value of 11.1%.
Equitable
Life Annual Benefit Statements
Your annual benefit statement is attached.
Please note that this quotes the transfer value that was applicable at 1 April
2004.
Where
to find information help or advice
Equitable Life – www.equitable.co.uk
The Financial Service Authority (FSA) has information
for policyholders of Equitable Life on their website
www.fsa.gov.uk/consumer/whats_new/equitable/mn_equitable.html
If you do not already use a financial adviser you can
contact IFA Promotions who will give you details of an independent financial
adviser in your area.
Address:
IFA
Promotions
Telephone: 0117 971 1177
Brislington
Bristol
Website: www.unbiased.co.uk
BS4 5PX
On behalf of NILGOSC
May 2004
This announcement represents our adviser’s
understanding of the position at April 2004. Features and issues are
liable to change without notice. This document has been issued on the
basis of publicly available information, our adviser’s internally developed
data and other sources believed to be reliable. This document is intended
as a strategic commentary and not independent financial advice in respect of
individual members.
EQUITABLE LIFE
INFORMATION NOTE - MARCH 2004
Dear Member
Equitable Life has published its interim accounts to
30 June 2003 and these state that ‘Equitable Life is solvent’.
However, it remains questionable whether Equitable Life can continue to meet
statutory solvency requirements.
There are fundamental uncertainties about the level of
reserves set aside by Equitable Life for mis-selling claims and outstanding
legal issues. In addition there have been difficult economic conditions
and Equitable Life has confirmed, for the first time, that no provisions for
non-guaranteed bonuses are included in the accounts. Therefore, our
advisers feel that the members would be wise to ignore anything other than
guaranteed bonuses.
We strongly suggest you seek independent financial
advice with regard to the following statements as our advisers recommend that:
-
- No
further contributions should be made to The Equitable Life with profits
fund
- Members
currently invested in the with profits fund (or lifestyle fund), who are
not close to retirement, should consider transferring their AVC
- Members
with unit linked funds remain exposed to the solvency of the with profits
fund
- No
pension annuities should be purchased from The Equitable Life
You may, if you wish, transfer your AVC fund from The
Equitable Life to the in-house AVC with Prudential. However, you should
note that Equitable Life will reduce transfer values from their with profits
fund (and the with profits element of lifestyle funds). Currently a reduction
in fund value of 11.1% applies.
If you are interested in transferring your AVC funds
to the Prudential please contact the NILGOSC Members Section on 028 9076 8025
and the appropriate forms will be sent to you for completion.
Where to find information, help or advice
Equitable Life – www.equitable.co.uk
The Financial Service Authority (FSA) has information
for policyholders of Equitable Life on their website http://www.fsa.gov.uk/consumer/whats_new/equitable/index.html
If you do not already use a financial adviser you can
contact IFA Promotions who will give you details of an independent financial
adviser in your area.
Address:
IFA Promotions
Brislington
BS4 5PX
Telephone: 0117
971
1177
Website: www.unbiased.co.uk
Fax:
0117 972 4509
On behalf of NILGOSC
February 2004
This announcement represents our adviser’s
understanding of the position at January 2004. Features and issues are
liable to change without notice. This document has been issued on the
basis of publicly available information, our adviser’s internally developed
data and other sources believed to be reliable. This document is intended
as a strategic commentary and not independent financial advice in respect of
individual members.
Equitable Life Update
at 09 June 2003
Dear Sir/Madam
NILGOSC – AVC FACILITY
I am writing to you because you are
a member of the Equitable Life Building Society Fund to keep you informed of current
rates offered by the Fund's other in-house AVC provider.
The interest rate applicable to the
Equitable Building Society Fund has reduced to 2.85% gross per annum with
effect from 01 March 2003.
The interest rates have been
monitored by the Pension Fund over the last 12 months and it has been noticed
that the interest rate declared by Equitable Life has become less competitive
than the rate declared by our other AVC provider, Prudential. In recent months
the gap has widened to almost 1%, following a commitment by Prudential to
declare a rate each month that will at least match the Bank of England base
rate.
The following table shows a
comparison of rates offered by Prudential over the last 12 months:
|
Month |
Equitable
Life***
|
Prudential Deposit Fund |
|
May 2002 |
3.12% |
4.00% |
|
June 2002 |
3.12% |
4.00% |
|
July 2002 |
3.12% |
4.00% |
|
August 2002 |
3.12% |
4.00% |
|
September 2002 |
3.10% |
4.00% |
|
October 2002 |
3.10% |
4.00% |
|
November 2002 |
3.10% |
4.00% |
|
December 2002 |
3.10% |
4.00% |
|
January 20003 |
3.10% |
4.00% |
|
February 2003 |
3.10% |
4.00% |
|
March 2003 |
2.85% |
3.75% |
|
April 2003 |
2.85% |
3.75% |
1. Further Info rmation
The Prudential Deposit Fund is similar
to a building society account, with a rate of interest declared at the
beginning of each month. This interest rate currently compares favourably
with those offered by the top three banks and building societies who operate an
AVC deposit fund.
Since 1 February 2002, Prudential’s
interest rate matches the Bank of England base rate**.
2. Your Options
Contributions to Equitable Life
Your future
contributions can either:
Continue to be paid to Equitable Life
Be paid to the Prudential Deposit Fund instead.
Existing fund with Equitable Life
This may either:
Remain invested with Equitable Life where it will continue
to receive interest, or
Be transferred to Prudential.
3. Charges
Transfers to the
Prudential Deposit Fund will be at no cost to you. No exit penalty will be
applied by Equitable Life and no initial charge is made by Prudential.
For future
contributions, there is no initial charge, and monthly interest rates are
declared after charges have been taken.
4. Next steps
If
you wish to transfer your existing fund and future contributions to Prudential
please confirm this to me in writing and I will send you the necessary forms
for completion.
The Pension Fund
will continue to monitor the performance of the Prudential Deposit Fund to
ensure that your AVC deposit investment is receiving a competitive rate of
interest.
5. Alternatives
It is important to remember that you can also make
private provision to top up your pension through Added Years, FSAVCs or in some
cases a Stakeholder or Personal Pension.
6. Financial Advice
Please note that whilst Prudential are able to provide
you with broad information and guidance, they are unable to provide financial
advice regarding your Equitable AVC or other financial matters.
You should also note
that NILGOSC is unable to provide you with any financial advice on this matter
therefore if you are unsure what to do with your Equitable AVC you should seek
independent financial advice. Further information regarding financial advice
can be found by calling the Independent Financial Adviser (IFA) Promotions
Helpline on 0117 971 1177 or at www.ifa.org.uk
7. Benefit
Statements
Due to recent
changes to policy values Equitable Life is unable to produce your benefit
statement until August at the earliest.
Yours faithfully
RICHARD STEVENS
TEAM MANAGER
.
**Prudential's current practice, which will be reviewed each year, is to set the
interest rate on the first of each month, in line with the Bank of England base
rate at that time. ***Based on Prudential’s understanding of Equitable Life
Building Society Fund rates. Calls to Prudential may be monitored or recorded
to improve service. Calls are charged at local rates.
Equitable Life Update
at 12 February 2003
CHANGES
TO SCHEME CHARGING TERMS
Equitable
Life has advised that the scheme charges have reverted to the original scheme contractual
rates.
With
effect from 1 February 2003 the initial charge that will be deducted from each
contribution paid under the arrangement is as follows:
With-profits
expense Unit linked (including lifestyle fund)
deduction
2.5%
4.5%
The
annual management charge of ½% per annum will continue to be applied to
investments in the above funds. The building society fund has no deductions.
Equitable Life Update July 2002
EQUITABLE
LIFE CHANGES TO SURRENDER AND MATURITY VALUES
Equitable Life have
announced further changes to the surrender and maturity values with effect from
1 July 2002.
These changes are
as follows:-
Early surrender
value financial adjustment is increased from 14% to 20%. Maturity values will be
reduced by 10% (previously 4%).
If the reduction in
maturity value takes the value below the guaranteed value then the guaranteed
value will be paid.
The changes apply
to the with profits fund and the with profits element of the lifestyle fund.
INFORMATION NOTE 25 FEBRUARY 2002
As you may be aware Equitable Life, one of the NILGOSC
Additional Voluntary Contribution (AVC) providers, has recently been the
subject of financial uncertainty due to a court ruling that some of its
policyholders were entitled to Guaranteed Annuity Rates (GARs).
To reduce the financial uncertainty Equitable Life
proposed a Compromise Scheme. On the 8 February 2002 the Court sanctioned
this Compromise Scheme and the Halifax have now paid £250m to Equitable Life.
As a result of the Compromise Scheme, With Profits
members will have their fund values increased by 2.5% based on policy values
and guaranteed values as at 11 January 2002.
The NILGOS actuary, Bacon & Woodrow have
recommended no further contributions to the With Profits fund. If
you are currently paying contributions to the With Profits fund or
Lifestyle with a with-profits element, you may wish to reconsider whether
you wish to continue making contributions. If you wish to cease making
contributions please let us know in writing.
If you have a Unit Linked or Building
Society fund, Bacon & Woodrow have advised that if Equitable Life becomes
insolvent there is a risk that part of the assets of the unit linked and
building society funds could be paid to with profits policyholders.
However, in their view the risk is very remote and even more so now that the
Compromise Scheme has become effective.
On 1 April 2001 NILGOSC appointed the Prudential as an
additional AVC provider.
If you wish, you can commence AVC payments with
Prudential and you may also wish to consider transferring your existing funds
from Equitable Life to Prudential. Please note that Equitable Life impose
a reduction on transfers from the with profits fund which is currently 10% of
the fund value. This financial reduction could be changed at any time.
If you wish to transfer your funds please contact
NILGSOC and we will send you the appropriate forms for completion.
If you have any queries please telephone NILGOSC and
ask for the members’ section.
INFORMATION NOTE - July 2001
EQUITABLE
LIFE AND ADDITIONAL VOLUNTARY CONTRIBUTIONS
Equitable Life have issued a new Press Release, a copy
of which is attached for your information.
After undertaking a financial review Equitable Life
have announced a number of changes that are summarised below.
AVC contributors with a “with-profits” fund or
Lifestyle+ funds with a “with-profits” element are directly affected by the
Equitable Life announcement. These policies will be reduced by 16% of the fund
value as at 31 December 2000. In addition there will be no growth on these
policies for the period from 01 January 2001 to 30 June 2001.
A member who transfers their funds out of a
“with-profits” policy will currently incur a transfer penalty (on top of
the reductions outlined above) of 7.5% of the fund value.
AVC contributors to Unit-Linked, Building Society
funds or Life Assurance are not subject to any reductions.
Further
Info rmation
Additional information can be obtained from the
Equitable Life website at www.equitable.co.uk.
You can contact the NILGOSC Membership team at 028
90768025 if you have any queries but remember that NILGOSC is unable to give
any financial advice.
INFORMATION NOTE - 19 FEBRUARY 2001
This is a copy of the note sent to
all AVC paying members via their employer on 23 February 2001. An application
form and a note on transfers and charges were enclosed with the note.
PRUDENTIAL/EQUITABLE LIFE AVC CONTRIBUTIONS
I am pleased to advise you that NILGOSC has now
appointed the Prudential Assurance Company Limited as an additional AVC
provider with effect from 01 April 2001.
Members will still have the option of paying AVC
contributions to Equitable Life if they wish to.
NEW AVCS WITH PRUDENTIAL
Should you wish to
pay regular contributions to Prudential from 1st April 2001, please
find enclosed an application form for completion and return to this
office. I also enclose an explanatory booklet to assist you in making
your decision.
The application form
covers both retirement provision and additional death
benefits (i.e life assurance).
If you only wish to
contribute towards your retirement provision, please complete parts 1, 2, 3, 4,
5 & 9 of the application. However should you wish to apply for
Additional Death Benefits please also complete parts 6 & 7.
Please be aware that
should you tick ‘Yes’ to any of the health questions in part 7 and/or wish
total cover in excess of £80,000, Prudential will issue you with a further
Medical Questionnaire. This questionnaire will require completion and
return, in order that their underwriters can consider your application and
approve your cover. In the meantime I shall arrange for your total
contributions to commence from your April salary and be invested towards your
retirement provision.
However, should you
only wish to contribute towards Additional Death Benefits, and tick ‘Yes’ to
any of the health questions in part 7 and/or wish total cover in excess of
£80,000, your contributions will not be commenced until Prudential’s
underwriters are satisfied with your application.
Please be aware that
in order for your contributions to be deducted from your April 2001 salary, I
require the return of your application form by 16th March
2001. If your application is not received by this deadline, contributions
will not commence until a later pay date.
Any application forms completed after 01 April 2001
should be forwarded direct to Prudential
LUMP SUM PAYMENTS
In order to make
full use of income tax relief for the 2000/2001 tax year, you are permitted to
forward NILGOSC a one-off personal cheque. Please be aware that the Inland
Revenue permits you to contribute a maximum of 9% of your salary (10% for
manual workers) in Additional Voluntary Contributions in any one tax
year. Your cheque payment must therefore take into account deductions
already taken from your salary during the year. Please make cheques
payable to ‘NILGOSC’ and return to this office by 16th March
2001. Any cheques received after this date, or are identified as
breaching Inland Revenue limits will be returned. NILGOSC will provide
you with suitable confirmation of receipt for presentation to your local tax
office and forward your payment to Prudential between 1st and 5th
April 2001.
EQUITABLE
LIFE AVCS
The Equitable Life has announced that Halifax Group
plc has agreed to buy the society’s business. However, the
Policyholders will not receive any windfall.
The Equitable intend to use the proceeds of the sale
to strengthen the with profits fund and restore investment freedom.
The Equitable Life will not be restoring the seven
month’s growth which was lost on with profits policies.
The 10% reduction to with profits funds on switch or
transfer remains in place.
TRANSFERS
Members may, if they wish, transfer their AVC funds
from Equitable Life to Prudential (or to a free standing avc). Equitable Life
does not charge for the transfer although with profits funds will be subject to
the 10% market adjustment.
Prudential’s charges are detailed in the attached
booklet.
Members with money invested in more than one fund (for
instance split between with-profits and managed fund) are not currently able to
withdraw part of the investment only, however, this is currently under
consideration by Equitable Life.
INFORMATION NOTE
- 13th
December 2000
Equitable Life and AVC
Contributions
Background
Earlier this year Equitable Life put itself up for
sale to raise the funds necessary to make good payments on certain policies arising
from a court ruling. Unfortunately, and contrary to expectations, it failed to
obtain a buyer. On Friday 8th December 2000 Equitable Life announced
that it had stopped taking new business with immediate effect.
Effect on AVC funds
Equitable Life has said that the effect on each type
of policy will be as follows:-
|
Type of fund |
Effect |
|
With-Profits or Lifestyle Plus |
No growth in
with-profits policy values from 1 January 2000 to 31 July 2000. Future performance
likely to be impaired as investments switched to bonds and gilts from
equities. If funds are
switched now to another type of policy (except due to retirement or leaving
the NILGOSC scheme) a penalty of approximately 10% on average will be imposed. |
|
Unit linked ie
Managed Fund, Lifestyle Tracker and Int Growth |
No effect. |
|
Building Society |
No effect. |
|
Life Assurance |
No effect, but if
members decide to cease payments they should ensure that their Life cover does
not lapse for any period, leaving them without cover. |
Options for Members
Members may well wish to leave their funds with
Equitable Life and continue to make payments after consideration of the effects
described above. However, due to the running down of business by Equitable Life
members should review the options available and take action to suit their own
financial circumstances.
NILGOSC is already in the process of seeking another
AVC provider(s) and we aim to make an appointment by February 2001. This
appointment will be publicised when made.
Members may wish to stop making payments now to
Equitable Life and freeze the fund. If so, please inform your employer and
NILGOSC to prevent further deductions from your salary. Once an alternative
in-house AVC provider is available you will be able to decide if it is in your
best interests to transfer your fund from Equitable Life to the new provider.
Members will need to carefully consider the implications of making a switch
because of the penalty to transfer in some cases being imposed by Equitable
Life.
As with any such decision, you should obtain
independent financial advice before taking action.
Further Info rmation
Equitable Life has published a press statement (copy
attached), additional information is on their website at www.equitable.co.uk, and can be
contacted by telephone on 0870 900 8020. You can contact the NILGOSC Membership
team at 028 90768025 for further information but remember that NILGOSC is
unable to give financial advice.
INFORMATION NOTE - October 2000
Equitable Life and AVC
Contributions
EQUITABLE
LIFE AND ADDITIONAL VOLUNTARY CONTRIBUTIONS
You may have read in the press recently that Equitable
Life lost an important court case involving some of its policyholders. As a
result it now intends to demutualise and merge, by way of a sale, with another
suitable company, yet to be decided. Equitable expects the sale to be complete
in the summer of 2001.
A secondary effect of the court case is
that members making AVC contributions to with-profit funds and Lifestyle+ funds
will receive no with profits bonus for the period 1 January 2000 - 31 July
2000. Equitable Life has stated that it intends that the loss of seven months’
growth will be made good from the proceeds of the sale of the business. This
would include backdating the lost funds in respect of members retiring in the
immediate future.
However, members who transfer investments out of the
with-profits fund will incur a transfer penalty (unless they are leaving local
government employment) in addition to the loss of bonus. This is likely to
reduce the value of their policy by approximately 10% in total. This liability
to a transfer penalty will only be applicable up to the point of sale.
Thereafter it is intended that no penalty will apply. As with any such
decision, you should therefore obtain independent financial advice if you wish
to switch your with-profits investment before the sale of Equitable Life is
finalised.
If
you are contributing to the other investment funds - the managed fund, building
society fund or to AVC life assurance you are not affected.
NILGOSC will keep under review its choice of Equitable Life as
the provider of AVC investments to the Scheme. Equitable Life has low
administration charges and offered a good level of return. We hope that any new
firm formed by the merger of Equitable Life will provide investments meeting
the same criteria and NILGOSC will consider its suitability as the Scheme's AVC
provider in due course.
The purpose of this Information Note is to alleviate
any concerns which you may have had regarding your AVC policy. NILGOSC will
advise you of future developments. Please do not hesitate to contact us if you
require any further information, but remember that NILGOSC is not authorised to
give financial advice.