Equitable Life boosts members' policy values

Equitable Life announced today it was increasing the value of members' policies by up to 5.5 per cent after deciding to reintroduce interim bonuses.

The mutual life insurer will pay an interim bonus for the first time since October 2008, while it is also reversing reductions it made to policy values in March last year.

People with UK with-profits pension policies will see the biggest increase, receiving an interim bonus of 3.5 per cent and a one-off increase of 2 per cent to their policy's value.

Those with UK life policies will be paid interim bonuses of 2.8 per cent and get a one-off lift of 1.6 per cent to the value of their policy.

The announcement offers some rare good news for beleaguered policyholders, who have suffered continued uncertainty and a series of reductions in the value of their policies since the society was brought to its knees in 2000 after losing a legal battle in the House of Lords.

Chris Wiscarson, chief executive of Equitable Life, said: "The Society is determined to recreate value for policyholders and these increases in policy values are small but important steps along this road."

Equitable reduced the value of with-profits pension and life policies by 2 per cent and 1.6 per cent respectively in March last year in response to what it described as the "challenging economic conditions" at that time.

But it said conditions had since improved, while a new deal with third party administrator HCL, which should save it ?100 million, had enabled it to now reverse the reduction.

Worth ?26 billion in its prime, the group's with-profits fund is now valued at ?5.5 billion and has around 200,000 policyholders.

The fund, which is mainly invested in less volatile gilts and bonds, is in run-off after Equitable failed to find a buyer for it.

Policyholders recently won a High Court victory when it was ruled that the Treasury had been wrong to reject certain specific findings by the Parliamentary Ombudsman, following a challenge brought by the Equitable Members Action Group.

The Parliamentary Ombudsman Ann Abraham had called on the Government to set up an independent tribunal to calculate compensation for policyholders, after finding 10 instances of maladministration by regulators and Whitehall officials in relation to Equitable in the period leading up to December 2001.

But the Government had rejected some of her findings of maladministration and her recommendations for compensation, and instead said it would make ex-gratia payments to policyholders "disproportionately affected" by the problems at the society.