Troubled mutual life assurer Equitable Life has announced anyone moving their policy away from the society before it matures will lose 20 per cent of its value.

The society blamed the increased financial adjustment, previously 14 per cent, on continued stock market volatility and a likely need to increase provisions for the with-profits fund.

It said the change, which takes effect immediately, was entirely necessary yet most regrettable.

The maturity value of policies for members who chose to take their benefits would also be reduced by ten per cent, unless this took the value of the policy below its guaranteed value, in which case the guaranteed value would be paid.

Equitable said the move was necessary to stop people taking more than their fair share of the with-profits fund, the value of which had been hit by stock market falls, when they moved their money away from the society.

Chairman Vanni Treves said: "The society is solvent and we continue to meet our regulatory capital requirements. The board's primary objective is to act in the best interests of continuing policyholders.

"To do this, we must ensure the society remains solvent and policyholders choosing to leave the fund do not take more than their fair share.

"We understand this is unwelcome news for those who choose to go now but the board would be failing in its duty if it did not act."

The society said despite holding only about 15 per cent of its fund in equities, recent market falls had had had a significant impact on its value.

Its close monitoring of the financial position of the with-profits fund led it to conclude it would be prudent to make further provisions. Details would be given in its interim accounts for the six months to the end of June, published in the autumn.

Policyholders who had already filled in the necessary forms to surrender their policy would be charged at the previous rate, provided the society had already received them.