Equitable Life Members Urged to Switch Amid Poor Performance

Strategic Insights -

Equitable Life members facing financial shock after the company committed "hara-kiri" are being advised to put safety aside and scrutinize performance and charges before deciding to stay or switch. The Financial Services Authority (FSA) is warning against panic decisions, but financial advisers believe thousands of members are likely to be losers and should consider switching immediately, especially those without guaranteed annuity rates. Personal pension policyholders are set to be worst hit, making up the majority of the with-profits fund and likely to pick up the bill for guarantees afforded to Guaranteed Annuity Rate policyholders.

Key Takeaways:

  • Equitable Life has slipped in recent years, raising concerns among financial advisers.
  • The FSA is warning against panic decisions, but many advisers believe members should consider switching.
  • Personal pension policyholders without guaranteed annuity rates are likely to be worst hit, making up the majority of the with-profits fund.
  • Advisers recommend switching to a rival like Standard Life, Axa Sun Life, Scottish Amicable, or Scottish Mutual, which have performed better over the past 20 years.
  • A switch to a rival would wipe out the effect of the 10% charge in five years and improve the pension payout.
  • Brian Dennehy of adviser Dennehy, Weller & Co recommends Axa Sun Life, Scottish Amicable, Scottish Mutual, and Standard Life, citing their superior performance over the past 20 years.
  • Dan Kemp of adviser Holden Meehan suggests looking for a new provider to drop entry charges and keep management charges below 1%, similar to the government's stakeholder pension scheme.

Statistics:

  • Equitable Life has trailed behind Standard Life by 1% per annum on average over the past 20 years (Source: Money Management magazine).
  • Equitable Life is likely to see its performance decline further, by 0.5% over the coming years (Source: Brian Dennehy).
  • The 10% charge imposed by Equitable Life would be wiped out in five years by switching to a rival like Standard Life.
  • Management charges for the government's stakeholder pension scheme are below 1% (Source: UK Government).
  • Axa Sun Life, Scottish Amicable, Scottish Mutual, and Standard Life have all performed better than Equitable Life over the past 20 years (Source: Brian Dennehy).

Sources:

  • Money Management magazine - citing performance tables provided by the magazine.
  • Financial Services Authority (FSA) - warning against panic decisions.
  • Brian Dennehy of adviser Dennehy, Weller & Co.
  • Dan Kemp of adviser Holden Meehan.
  • UK Government - providing information on stakeholder pension scheme management charges.