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Society invests), that Nationwide Building Society has withdrawn from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.