Annual review of Additional Voluntary Contributions (AVCs) with Equitable Life

Transcription

1 Dear Member, Annual review of Additional Voluntary Contributions (AVCs) with Equitable Life NILGOSC, in consultation with its AVC advisers, Aon Hewitt Limited (Aon Hewitt), has completed its routine review of the Scheme s AVC arrangement with Equitable Life Assurance Society (Equitable Life). The content of the review is summarised in this letter and it may influence your investment decisions. This letter details the following information: Information on financial strength Detailed information about the investment options with Equitable Life An update on the Payment Scheme A performance report for all funds offered by Equitable Life (Annex A) Financial Strength Equitable Life is a mutual society and is therefore owned by the members of the With- Profits fund. Equitable Life holds a B- overall financial strength rating from AKG Consultants and Actuaries Ltd, a specialist in the provision of ratings information and market assistance to the financial services industry. Our adviser s view is that Equitable Life s financial position remains relatively weak. Equitable Life has been closed to new business since 2000 and is expected to have continued outflow of assets. General View Our advisers believe that Equitable Life's financial position remains relatively weak and they believe that a number of other providers offer significantly greater financial security. You can choose to leave your funds with Equitable Life or transfer them to the range of funds offered by the alternative in-house provider, Prudential. Investment Options NILGOSC s advisers have prepared more detailed information on specific funds and this is drawn to your attention. If you are unsure of your investment funds then please refer to your last Equitable Life Benefit Statement. Deposit Account Fund The Deposit Account Fund invests in the Bank of Scotland Deposit Fund, which tracks the Bank of England base rate. The current interest rate is 0.5% which has remained unchanged since April Any transfer out of the Deposit Account Fund will be subject to a 2.5% scheme charge because the charge was not paid on the initial investment. However, this charge is avoided if a member takes their benefits through retirement or on death. 1

2 Members of this fund should carefully examine their current investment and future contributions with Equitable Life and consider moving them to the alternative provider, Prudential. Unit-Linked Funds Our advisers continue to have concerns about the financial stability of Equitable Life as well as the equity management capabilities of Scottish Widows Investment Partnership (SWIP), who manage unit-linked funds. Due to the continued solvency position issues, absence of contractual guarantees and consistent underperformance, members of this fund should carefully examine their current investment and future contributions with Equitable Life and consider moving them to the alternative provider, Prudential. Lifestyle Option The lifestyle option initially invests in the UK FTSE 100 Fund and then a five to ten year switching period applies prior to retirement. Our advisers have recommended a shorter switch period (no more than five years) if money is being moved into a Money Market Fund. A Money Market Fund may be appropriate if a member is seeking to take all their AVCs as cash at retirement. If a member is considering purchasing an annuity with their AVCs then a switch into a long date bond fund such as the Gilt and Fixed Interest Fund may be appropriate as it aims to move in line with the cost of annuities. With-Profits Fund The With-Profits Fkund continues to shrink significantly in value and our advisers continue to have concerns regarding ongoing solvency position. As at December 2011, AKG rates the financial strength of the With-Profits fund as adequate and its future performance prospects as poor. However, AKG has confirmed that there are signs of some improvement in relation to future performance prospects. Policy values as at 31 December 2010 continue to be enhanced by 12.5% for retirements and transfers from the With-Profits Fund. However, the current reduction in policy values (5%) continues to apply to transferring members. Voluntary Life Assurance Only a small number of members contribute towards voluntary life assurance. The rates continue to be competitive relative to the rest of the market. Our adviser s recommendation is that there is no reason to change life assurance provider at present. Payment Scheme NILGOSC advised its Equitable Life members of the Payment Scheme in June 2011 and at that time the Government planned to write to all eligible policyholders by mid We have since been advised that due to the complexities of retrieving contact details for group scheme members individuals may now not be contacted and receive their cheques until as late as April You do not need to take any action at present. The main principles of the Payment Scheme are: 2

3 The available funds will be allocated on a pro rata basis, in proportion to the size of the relative loss which equates to 22.4% of each policyholder's loss subject to a minimum payment of 10. There will be a single policyholder view which will offset gains against losses where multiple policies are held. Priority will be given to the oldest policyholders and the estates of deceased members. Investment Decisions As with any choice of investment, no one can predict with certainty which fund will offer the best return. When you compare funds, you need to decide which investment is most suitable for your needs. Often this will depend upon how far you are from retirement. If you are due to retire in a relatively short period of time (less than ten years) there is limited potential to invest in an alternative fund option which will produce a greater return than the With-Profits fund. A transfer out from the With-Profits Fund now will not impact upon any potential entitlement to a compensation payment. Any investment decision is a personal one, reflecting your financial circumstances, approach to investment and attitude to risk. If you are in any doubt, you are recommended to get independent financial advice. The Committee and its advisers cannot give you financial advice. If you do not already use a financial adviser, IFA Promotions can give you details of an independent financial adviser in your area. You can contact IFA Promotions at: IFA Promotions Limited 2 nd Floor, 117 Farringdon Road, London, EC1R 3BX contact@ifap.org.uk Some information about policies can be found on their website Please note that the information provided on this website is limited in scope. If you wish to transfer your investment funds from Equitable Life to Prudential please complete and return the attached transfer request form to NILGOSC at the address on the form or contact NILGOSC on and ask for Pensions Administration. Please note that Prudential introduced charges from 19 August 2012 that will affect any new contributors who withdraw their funds from the Prudential within the first five years, including withdrawals on retirement. Existing members who have paid at least one AVC pension contribution prior to the introduction of the charge are not be affected. Charges will apply irrespective of the method of payment and the only exceptions will be fund switches, death claims and ill-health retirements. If you require more information, the Pensions Administration Department at NILGOSC is happy to help with your questions, but please remember that NILGOSC staff cannot give 3

4 you financial advice about your investments. The Pensions Administration Department can be contacted on or by at Yours sincerely Zena Kee Pensions Manager 4

5 Annex A Equitable Life Funds A full list of funds, including their annual management charge, 1 and 3 year investment returns and Aon Hewitt s view of each fund is summarised in Table 1. Fund Annual Management Charge 1 year return to 30 June 2012 (%) 3 year return (%) Aon Hewitt view Deposit Account Interest rate declared net of charges (Benchmark*) (Benchmark*) 0.5 n/a Concerns about financial security Unit linked Not available -0.6 (-0.4) Lifestyle Not available -2.3 (0.4) 6.4 (7.1) 5.3 (5.4) Concerns about financial security and concerns about SWIPs equity management capabilities and would like to see stability in the bond team Concerns about financial security and do not view SWIP as having strong passive management capabilities With-Profits Bonus declared net of charges 3.5** n/a Concerns about financial security * The benchmark is the relevant index against which the performance of each fund is measured. ** current bonus rate 5

6 Transfer Instructions transfer of AVC from Equitable Life to Prudential Please fill in this form and return it to: NILGOSC, Templeton House, 411 Holywood Road, Belfast, BT4 2LP PLEASE USE BLOCK CAPITALS Full Name: Date of Birth: Telephone number: Please tick I wish to transfer the value of my existing Equitable Life With-Profits investments to the Prudential. I wish to transfer the value of my existing Equitable Life Unit-Linked investments to the Prudential. I wish to transfer the value of my existing Equitable Life Deposit Fund investments to the Prudential. Your signature I have read the update from NILGOSC dated December 2012 and I understand that: Any transfer out of the Equitable Life With-Profits Fund may have a financial adjustment applied to it. This can change and the transfer value is not guaranteed. At 1 December 2012 the individual transfer value quoted by Equitable Life would have been 95% of my policy value. If I wish to transfer to Prudential, NILGOSC will on receipt of this request forward me a transfer pack for completion and return. Signed: Date:. If you are in any doubt about your investment options you are recommended to seek independent financial advice. If you do not return the form your Equitable Life AVCs will continue to be invested as they are currently. 6