Equitable Life, the troubled life office, has written to 55,000 'with profits' policyholders suggesting that they adjust the level of annuity bonus rate assumptions for their 'with profits' annuities. They have even suggested that people consider switching their 'with profits' annuities to the more conventional, guaranteed, annuity.
'With profits' annuities pay income to people at varying levels of which part is linked to an assumed investment return. If people assume higher returns and draw a higher income they risk substantial reductions in income in the future if investment returns (or bonus rates declared) are lower than the the income drawn as capital erosion occurs.
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