A Potted History


In 1988 when Maggie Thatcher brought in Personal Private Pensions, Equitable decided to put those in the same with profits fund as the previous retirement annuity.  This was OK then as the RAs had guaranteed annuity rates (GAR) which were actually lower than the then current annuity rates.

About 1994 things started to change as interest rates dropped and Equitable must have realised there was a problem and so started to sell as many products as possible to support the GAR liability.  To sell the product Equitable offered extremely high bonuses by distributing all their income rather than keeping any for a rainy day.  (Although this is denied.). They also tried to reduce the GAR liability by paying out different terminal bonuses to GARs and non GARs.

The GARs took them to court which Equitable paid for as they believed that they were in the right and would be the deciding case for the industry. The case went to the House of Lords who looked at it as a contract case and many say the judgement was flawed, anyway Equitable lost and so had to be put up for sale, but due to the GAR problem no one was interested in buying, so in December 2000 the fund was closed.

The Halifax then bought most of the assets in February 2001 and there was a compromise agreement to get rid of the GAR problem which was agreed in 2002. Any one still in Equitable could not sue on that policy for mis-selling re the GAR in return for an uplift to their fund. However many people left beforehand and now Equitable are trying to sort out claims for mis-selling as people were not aware of the GAR problem.  Something Equitable still have not looked at is the GIR problem which could finally destroy them. 

Up until 1996 Equitable offered a Guaranteed Interest Rate of 3.5%, which may be very difficult to pay.  As they are now virtually out of equities they have virtually zero capital growth as most investment are bonds and gilts. In fact they are not really a with profits fund any more.

How the Equitable Life ended