The Equitable Life Assurance Society (“Equitable Life”) business transfer to Utmost Life and Pensions Limited (“ULP”) was completed on 1 January 2020 as planned.
At their meeting on 1 November 2019, Equitable Life Policyholders voted overwhelmingly in favour of closure of Equitable Life’s With-Profits Fund and the transfer to ULP, which includes the conversion of With-Profits policies to unit-linked policies. Subsequently, High Court approval for the transfer was received on 4 December 2019.
ULP is expected to provide a financially stable home for Equitable Life policies and the transaction maximises the capital distribution to with-profits Policyholders. Policyholders should also benefit from enhanced security as a result of ULP’s stronger capital position.
What does this mean for members of the Plan?
Some members had Additional Voluntary Contributions (AVCs) invested with Equitable Life as part of a group policy where the Trustee was the Policyholder. The assets held within this group policy have been transferred to ULP.
How will the new policy with ULP be invested?
ULP does not offer a traditional with-profits investment option, therefore the Trustee was provided with information, by Equitable Life, setting out the available unit linked options.
Given the short time between approval by the High Court and the deadline to confirm investment choices to Equitable Life, the Trustee made the initial decision to invest members AVCs in ULP’s default investment strategy. This means that members' AVCs will be placed in a Secure Cash Fund (that is guaranteed not to fall in value) for the first six months following the transfer date. The key reason the Trustee has selected a six-month transition period is because it is currently investigating the possibility of transferring these funds to the Plan's other AVC provider - Legal & General. If it is in the Members’ interest the Trustee intends to move all ULP funds to Legal and General as soon as practicable.
As part of the transfer agreement, with-profit policies received a one-off increase in value. This uplift was, in part, in recognition that the inherent investment guarantees associated with with-profits policies will no longer apply. The estimated uplift for the group policy in which Plan members AVCs are invested was 68%. The final uplift will be confirmed later this month / early next month.
What happens next?
In the next few weeks, the Trustee will write to all members who had AVCs invested with Equitable Life, providing further information including confirmation of the final uplift applied to the value of the group policy. Members will receive this communication either as a letter or an email, depending on the member’s preferred method of communication.