12th November, 2018
Equitable Life has recently announced the intention to transfer its policies to Reliance Life which is likely to result in payment of the capital distribution to those funds invested in with-profits. It is thought that the amount payable may be in the region of 60-70% which is potentially great news for members as the amount payable has always been discretionary and paid at a lower amount of 35%. The transfer and payment is expected to take place towards the end of 2019.
This does however mean that particular care needs to be taken and considered for any members with such investments as payment of the benefits or a discharge of the funds before the transfer to Reliance would result in the higher capital distribution not being paid to the member. This would of course financially disadvantage the member and trustees should ensure that members have access to and understand all key information before deciding to disinvest their fund. Clear communication with members is therefore key.
In addition to the normal checks that are carried out before such disinvestments are made, the following points may be helpful to take into consideration:
- Does the discharge need to take place or can it be deferred. For example, if the member is retiring, can they leave their Additional Voluntary Contributions (AVCs) invested until the capital distribution is awarded whilst taking their defined benefit pension?
- If the discharge needs to proceed, are there other options available which would not result in the uplift being lost.
- Equitable Life also require their Payment of Benefits form /Discharge Forms for any individual release of benefits to be completed before any transfer which now asks for the following to be declared.
“The member is aware of the potential uplift to with-profits policies in 2019. The member understands that any withdrawals taken from the with-profits investment before then will not benefit from that additional uplift.”
The information provided to members is therefore vital to ensure they understand the potential impact and that they are able to make a fully informed decision before any discharge takes place and is something that needs to be declared when discharging individual fund values.
Whilst this is pleasing news for members, trustees need to ensure that the additional due diligence steps are carried out to ensure that members are able to benefit from the uplift when the time comes.
Further detail and information can be found at the following links which we would encourage you to read: