Equitable investors face new sting

12 April 2012

EQUITABLE Life is again likely to raise the penalty facing policyholders who want to quit after the vital survival vote this week .

The 239-year-old mutual, which already demands 10% of fund values from withprofits policyholders who leave, has threatened to raise the charge if the vote fails - and has hinted at an increase even if it is successful.

The penalty, known as a market value adjustment, could double to 20% to stop policyholders fleeing after Friday's deadline, say experts.

An Equitable spokesman said: 'The MVA will have to be altered in line with what is right for the society's with-profits fund. The value of underlying assets and the strength of the fund must be protected for existing policyholders. Insolvency must be avoided at all costs.'

If Equitable was insolvent, policyholders would receive only 90% of existing policy values and no further bonuses. To avoid this, Equitable must stop policyholders leaving the £20bn withprofits fund after the vote.

But Danny Cox, pensions development manager for Bristol-based financial adviser Hargreaves Lansdown, said: 'People will leave in droves whether or not their policies get a cash injection.'

The last chance for policyholders to vote is at a special meeting at Wembley Conference Centre, north London, on Friday. Postal votes must be received by Wednesday.

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