Equitable Life, the life assurer that came close to collapse in 2000, has increased its payout ratio again.
From April 1 2015, it will increase its capital distribution on with-profits policies to 35 per cent, from 25 per cent. It said the improvement was made possible by the transfer of its annuity business to Canada Life and the agreement with Halifax to take back full control of its unit-linked business.
The process of enhancing policy values began in 2011, when those leaving the society or whose policies matured received an uplift of 12.5 per cent. That was increased to 25 per cent last year, when the society also removed the 5 per cent exit penalty.
The latest increase was announced just days before new freedoms on pension savings come into force. Many Equitable policyholders may decide to cash in their pensions now to take advantage of the new rules and the increased payout, predicted Tom McPhail, head of pension research at Hargreaves Lansdown.
Other options include transferring the policy to another pension provider, using it to purchase an annuity, or transferring to an income drawdown plan. Equitable does not offer income drawdown or “uncrystallised pension fund lump sums” (cash withdrawals from pension plans).
Policyholders could also leave their funds invested, although there is no guarantee that the capital uplift will be the same in future years. The society is closed to new business.
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