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  • ELAS - Reduction of unit-linked funds 2016

ELAS - Reduction of unit-linked funds 2016

Equitable Life AVCs

This information is for Members who have an AVC that is invested in a unit linked fund managed by Equitable Life. The information is provided by Equitable Life

Equitable Life are proposing to reduce the number of funds that they manage and the funds shown below will close. Where a member is investing in one of the closing funds they may choose to switch their investment to other Equitable unit linked funds of their choosing from the table of funds shown below, or if no action is taken Equitable will switch the holding in the closing fund to the alternative fund also shown in the table.

 

Fund

Charge%

Closure DateIf no fund instruction we will switch toCharge %
Ethical126 July 2016International Growth0.75%
Japanese0.7526 July 2016International Growth0.75
Special Situations12 August 2016Pelican0.75
Smaller Companies12 August 2016Pelican0.75
High Income116 August 2016Pelican0.75
UK FTSE 100 Index-tracking0.516 August 2016UK FTSE All Share Index-tracking0.5

 

Questions and answers

Q1. Why are you closing these funds?

The Society is run off and so our unit linked funds become smaller and smaller as policyholders retire. In consequence, the cost of administering the funds becomes disproportionately large and we propose to mitigate this by combining funds.

 

Q2. How have you chosen the alternative?

These funds are the closest match to the closing funds and, in most cases, have similar investment characteristics and levels of risk.

 

Q3. What unit-linked funds are available?

These are the funds we intend to keep alive as part of our future offering.

 

MoneyFund of Investment Trusts
ManagedEuropean
North AmericanFar Eastern
PropertyGilt and Fixed Interest
International GrowthPelican
UK FTSE All Share Index-tracking 

Further information, including fund charges, can be found on our website at www.equitable.co.uk/funds

If you would like to choose a different fund, simply let Equitable know what alternative you would like from the list.

 

Q4. How will members know when you have switched their funds?

Equitable Life will write to you to confirm the prices used and the number of new fund units secured. There is currently no charge for switching.

 

Equitable Life with profits fund

If you have an Equitable Life AVC that is invested in the with profits fund, the below information may be of use to you.

The Fund has been advised that the Equitable Life Board have decided that the level of capital distribution will be maintained at 35% of policy values.

Equitable Life has issued the below Questions and Answers on Capital Distribution which is shown below.

 

Capital Distribution - questions and answers


Q1 How does the capital distribution work?
For each with-profits policy, we look at its value as at 31 December 2014 and, for every £1000, we allocate an extra capital distribution of £350 to that value. At the point a policyholder leaves the Society, we take the policy value plus the capital distribution, compare it with the policy's guaranteed value, where applicable, and pay out the larger amount.

 

Q2 What is meant by the policy's "guaranteed value"?
Most with-profits policies have a guaranteed value and this is clearly shown on your annual statement.

 

Q3 How likely is it that capital distribution will reduce?
Under the new solvency regulations introduced in January 2016, low interest rates and sharply moving markets typically require more capital to be set aside to safeguard the Society. For example, in the run up to the Referendum, or even after, it is possible that markets will become more turbulent. In such a situation, we may need to reduce capital distribution and that is the risk we want to draw your attention to. It is impossible to say how likely that risk will turn into a reality.

If the Society decided it was the right thing to reduce the capital distribution, it would act very quickly with no advance warning.

 

Q4 What could the capital distribution rate reduce to?
It is impossible to predict where in the range of 0% to 35% it might fall as that will depend on the economic circumstances at the time. A return to economic stability will be the Society's platform from which it can once again aim to increase the capital distribution.

 

Q5 What happens if I leave and the capital distribution subsequently changes?
The prevailing capital distribution amount will be the one that applies at the point you take your policy benefits. There would be no subsequent adjustment.

 

Q6 How can I see what the capital distribution is worth to me?
Your annual statement, due at the end of April, will clearly show your policy value and the impact of the 35% capital distribution. Unless you need to see your policy value urgently, we recommend that you hold on to your annual statement to see what your policy is worth.

 

Q7 How do I know that you will have enough money for policyholders who are likely to retire some years in the Future?
We go to great lengths to establish an appropriate level of fairness between policyholders who leave and those who stay. To help policyholders with their planning, we thought it right to point out the impact current world economic markets are having on capital distribution.

 

Q8 Where can I get financial advice?
We recommend you speak to an Independent Financial Advisor or visit the website www.moneyadviceservice.org.uk

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