Equitable Life Payment Scheme explained
- Why the compensation scheme was set up
- How to find out if you're eligible for compensation
- How Equitable Life compensation will be paid
- When you might expect to receive a payment
What is the Equitable Life Payment Scheme?
The Equitable Life Payment Scheme was set up by the government following the collapse of life insurer Equitable Life. Poor regulation meant the insurer was forced to close in 2000 after losing a £1.5bn court case, losing almost a million pension policyholders a total of £4.3bn.
In October 2010, the Government announced that it would pay out £1.5bn to these policyholders via the Equitable Life Payment Scheme, which completed its first year of operation in June 2012.
Currently over 288,000 policyholders have received payment totalling £277m. The oldest Equitable Life customers received their compensation first.
Find out more: How to buy life insurance - find the best policy for your needs
Am I eligible for compensation?
Three types of Equitable Life policy are eligible for a payout. They are:
- Accumulating with-profits policies. This includes individual and group policies, like occupational pension schemes. Your policy must have started between 1 September 1992 and 31 December 2000 or you must have paid one premium into it between 1 January 1993 and 31 December 2000.
- Conventional with-profits policies. This includes deferred annuities and endowments. To be eligible for a payout, you must have bought the policy between 1 September 1992 and 31 December 2000.
- With-profits annuities. These have to have been bought between 1 September 1992 and 31 December 2000. This is the only policy type eligible for a full payout. Our guide to with-profits funds explained has more details on these schemes.
How much compensation will I get?
The payouts are based on 'relative loss' calculations – the difference between the returns policyholders actually got and the returns they would have got if the investment had been made in a similar product with a comparable company.
If you had a with-profits annuity with Equitable Life, your relative losses will be covered in full. For relative losses on accumulating with-profits policies and conventional with-profits policies, compensation will be 22.4% of your losses. So if you lost £10,000, you'll get £2,240.
If you have other policies with Equitable Life that made a gain, your payout will be lowered to offset that gain. Most payments so far have been between £100 and £250.
If your loss was less than £10 you won’t receive a payment.
What form will the compensation take?
Accumulating with-profits annuity policyholders and conventional with-profits policyholders will get a single lump sum, which will be free of all tax apart from inheritance tax. Read our guide on tax rates, allowances and amounts for more on how tax works.
With-profits annuity policyholders will have their payments spread over five years. Payments relating to what you’d get if you'd bought a comparable annuity will be paid until you die, or until your spouse dies if you have a joint annuity.
What do you need to do?
The payment scheme has contacted just under half of eligible individual members, but hasn’t started on group policyholders yet. If you think you have an eligible policy, you can visit the Equitable Life Payment Scheme website to check it against the criteria, or call the helpline on 0300 0200 150.
In the 2013 Budget, the Government announced that it would make ex-gratia payments of £5,000 each to Equitable Life policyholders who bought a with-profits annuity from the company before 1 September 1992 and are aged over 60.
In July 2013, it was revealed that 20% of Equitable Life policyholders may never get a payout, due to administrative issues. This means that 236,000 eligible policyholders may miss out on payments - and as the closure of the scheme in March next year will not be published until September, people won't have much time to submit their applications.
The scheme has been plagued by problems - by March 2012, just £168m had been paid, rather than the expected £500m. The Treasury also destroyed the details of 353,000 policyholders on data protection grounds.
Up to March this year, the scheme had paid £577m to 407,000 people. The compensation scheme closes in March 2014, by which time it needs to have paid out another £370m to 664,200 policyholders.
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Your home may be repossessed if you do not keep up repayments on your mortgage.