Policyholders with the troubled Equitable Life have difficult financial decisions to make in the coming weeks. With the collapse of the proposed sale of the life assurer, its 25,000 Irish policyholders will have to assess how best to protect their investments and ensure growth in their value.

The Consumers' Association of Ireland yesterday called on the Society of Actuaries to publish a policy statement on the issues involved for worried policyholders.

Already Equitable's with-profits policyholders have lost out on returns for the seven months from January to July - an estimated two to three percentage points of growth in the value of their funds. And in Britain with-profits policyholders face a 10 per cent "penalty" for early encashment of policies. But the managing director of the Irish operation, Mr Noel Creedon, insisted yesterday there would be no penalty "at the moment" in the Irish market for early encashment of with-profits policies. "We have no need to introduce one. We have a surplus on the fund at the moment so there is no need to have a market value adjustment (MVA)."

A market value adjustment is a penalty insurers can impose on policyholders who cash in their policies before the agreed term. It is used to protect the value of the assets remaining for the policyholders who stay in the fund to the end of the agreed term. In the UK the MVA on early encashment of with-profits policies was increased from 5 per cent to 10 per cent last week - firms can increase this penalty at their discretion. Mr Creedon agreed that a rush of early encashments could force the firm to introduce an MVA penalty to protect policyholders remaining within the fund. "We will keep the situation under review. Our primary responsibility is to those who remain inside the fund," he said.

But returns on Equitable with-profits policies are expected to fall because of the requirement imposed by the Financial Services Authority that it adopt a more cautious investment approach. With no MVA at the moment Irish with-profits policyholders now need to weigh up Equitable's projected returns against those available from other companies and to assess the differences in the charges and the risks involved.

Equitable Life stopped selling new policies last Friday - it no longer has the capital required to back growth. The company has assured existing policyholders that their investments are secure, that it can continue to invest these funds for them and that it will continue to pay premiums due under existing policies.

The issues for policyholders now are: are their existing funds safe and can the company produce a good return on their funds? Policyholders must decide whether to continue to pay into existing policies or whether they would be better off cancelling existing policies and/or switching to other investments to try to get better returns.

Are existing funds secure? The security of capital invested with Equitable depends on the firm's solvency which is monitored by the Financial Services Authority. Last week the FSA told Equitable to change the investment balance on its with-profits funds towards a more cautious approach. Overall the funds with the life assurer are considered to be secure.

What is at risk now is the future returns on investments. With the FSA ruling that the existing equity to government bonds/cash investment balance be changed from 70/30 per cent to about 50/50 per cent, returns on with-profits policies are likely to suffer. Equitable reckons its returns will fall by 0.5 to 1 percentage point. But some market sources expect a bigger fall. At the same time there is a risk that investment performance on unit-linked funds could suffer if the best investment managers are poached by competitors.

Equitable Life has two types of Irish policyholders. Of the 25,000, about 6,000 to 7,000 have unit-linked funds and about 60 per cent of these are pension policies. The balance of the investors are in with-profits policies, with some 60 per cent of these in pension products and the balance mainly in regular savings/investments. Investors who take out policies either make regular premium payments such as a monthly sum, or, lump sum annual premium payments which is how many self-employed people fund their pension policies. Some policies offer an option to make additional top-up payments.

What policyholders should do now very much depends on the type of policy they hold and the period left to maturity. The FSA has told Equitable to provide comprehensive and timely information to its policyholders so they can fully consider their options.

Unit trust policyholders can sell their units at any time without penalty. The selling price is the bid price quoted in the newspapers. Investors should take independent advice before making any move. They need to weigh up the returns available in the market and the charges involved compared with the lower charges at Equitable.

It is important to note that if it is a pension policy that is being encashed the funds must be lodged in another pension scheme which will have to be set up with another life company.

With-profits policyholders: these investors have already lost out this year because no profits have been allocated to their funds between January and July. This loss which industry sources say would have meant growth of about 2-3 per cent will not be replaced. The company had hoped a buyer would pump in funds so that bonus payments could be made.

Equitable insists growth will accrue to with-profits policies again from August in line with the investment performance of its with-profits funds. But because the growth in these funds will be impaired by the new solvency requirements, the return to policyholders may be lower than that available elsewhere in the market. With-profits policyholders will need to assess their position carefully.