New threat to Equitable deal

CITY LEGAL firm Linklaters believes Equitable Life group pension scheme members could thwart the ongoing compromise deal aiming to cap its £1.1bn liability to guaranteed annuity policies.

Policyholders voted on a deal last week, which the troubled mutual says, would give it financial security. While a result supporting the compromise is expected to be announced later this month, Linklaters has warned its clients that members of Equitable Life group pensions schemes could be entitled to the more valuable guaranteed annuity rate (GAR) policies.

The firm believes thousands of members of these schemes could still be entitled to the same rights as guaranteed annuity rate (GAR) policies, even though Equitable withdrew GAR rights from group schemes between 1988 and 1993.

Under the proposed compromise, those with GAR policies will see their funds' values boosted by an average of 17.5% in exchange for waiving their GAR rights. Non-GAR policyholders will have their fund value rise by 2.5% if they agree not to sue for mis-selling.

Linklaters has questioned whether Equitable had the right to remove GAR rights without receiving the explicit consent of these group scheme trustees.

A change in the status of these policyholders would undermine the financial basis of the deal, meaning even greater uncertainty for the future of Equitable and its policyholders.

Linklaters is unable to say whether any of its clients are likely to mount an 11th hour objection to the compromise deal. A spokesman said: 'After considering this issue we concluded that we were obliged to bring this to the attention of other clients in a similar position. Each of our clients will obviously have to consider their own positions, and we cannot comment further on what, if anything, our clients may want to do.'

Peter Quinton of London-based IFA The Bureaux, said: 'Equitable would have looked at this issue before, I think it unlikely a challenge will start at this stage.'