For with profits annuitants, what would happen if Equitable became insolvent?
The FSCS, which took over from the Policyholders Protection Board last December, admits no one has yet had a good look at annuities. But in the hypothetical case of a life insurer going bust – no one has yet defaulted – the most likely course is that the liquidator would set out a claim on the FSCS. The value of the annuity would have to be calculated on the basis of how much it would cost to buy the present income at current age. Then, in all probability the annuitant would receive 100% of the first £2,000 and 90% of the balance of this lump sum. This will not replace the income in its entirety.
