THOUSANDS of North-East customers of life assurer Equitable Life are having their nest eggs slashed.

The 240-year-old firm has said pension policies for its 400,000 with-profits policyholders would be reduced by 16 per cent of the value of the policy at December 31 last year.

This means that a pensions contract with a total policy value of £50,000 at the end of last year, would be reduced to £42,000. Equitable said the action was vital for the long-term interests of the society and its policyholders.

It said it made the decision in response to the heavy fall in stockmarket values, because the maturity values of policies now significantly exceeded the value of the investments which supported maturing policies, and because a large number of policyholders were retiring and taking their benefits.

Chairman Vanni Treves said: "Difficult times require difficult decisions. We very much regret the need to reduce bonuses and the great concern this will cause policyholders, particularly after the disappointments they have suffered in the past year."

Equitable closed its doors to new business last December after a House of Lords ruling. left it with a £1.5bn liability to guaranteed annuity rate policy holders.

The ruling concerned its failure to honour promises to pay high bonuses to around 90,000 customers who joined in the 1970s and 1980s.

"Given the impact of market movements, the board believes that this action is absolutely necessary and is in the long term interests of policyholders."