Equitable Life’s capital distribution rises to 35% just in time for the pension freedoms

24th March 2015


Equitable Life is to increase its capital distribution to 35% this April up from 25% last year.

The move comes as many investors will be hoping to take advantage of the Freedom and Choice in pensions reforms.

For those retiring but planning to manage their assets in income drawdown, Equitable Life will not be offering this service nor the ability to take an uncrystallised funds pension lump sum.

The distribution happens when a policy matures, is cashed in or in the case of a pension, is transferred. Exit charges remain at zero. The 35% capital distribution will be set out on statements valuing policies with effect from 31st December 2014.

A policy valued as at 31st December 2014 £10,000 will now see a distribution of 35% or £3,500 bring the total on maturity or transfer would be £13,500.

Hargreaves Lansdown has set out the options for investors.

Options (pensions)

1              Do nothing and stick it out until maturity. Your policy stays the same and next year the capital distribution could be lower, higher or stay the same. The bonus rate for most policies is 2% so better than cash but not as good as you would hope from the stock market.

2              Bank this improved capital distribution by transferring to another pension plan. This suits those with time to invest before taking their pensions and those who plan to use income drawdown in the future as opposed to annuity purchase.

3              Use the open market option to buy an annuity. Shop around to get the best rate and ensure you detail health conditions to benefit from any enhancements. Using an annuity broker is the best way to do this.

4              Use the pension freedoms to cash in your pension policy. You can do this with Equitable Life and do not need to transfer. There will be no charges and you will benefit from the improved capital position. We understand that Equitable Life has doubled their helpdesk capacity to support policyholders (0845 603 6771).

5              For those planning to draw an income from their pension now, transfer to an income drawdown plan to take benefits over time. This will also bank the increased value of your Equitable life policy.

Tom McPhail, head of pension research, Hargreaves Lansdown says:The Equitable Board has achieved a commendable turn-around from the dark days of 10 – 15 years ago. The timing is particularly fortunate; with the pension freedoms just around the corner, many investors are likely to see this as an ideal opportunity to secure these gains, transfer to another pension and put the whole saga behind them”.

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