Equitable Life Payment Scheme explained

What is the Equitable Life Payment Scheme?

The Equitable Life Payment Scheme has been set up by Government for just under a million of policyholders who lost £4.3 billion through the poor regulation of Equitable Life. In October 2010, the Government announced, given the strain on public finances, it would pay out £1.5 billion to these policyholders.

How do I know if I'm eligible for Equitable Life compensation?

There are three types of Equitable Life policies, whose holders are eligible for compensation:

• Accumulating with profits policies - both individual policies and group policies (such as occupational pension schemes);
• Conventional with profits policies;
• With profits annuities.

In the case of the accumulating with profits policies, conventional with profits policies and with profits annuities, the policies must have been bought between September 1992 and 31 December 2000. Alternatively, policyholders will need to have been paying regular premiums on these policies from 1 January 1993 and 31 December 2000.

Importantly, you must have suffered a loss (compared with what you could have got from another company) to receive a compensation payment. You can find out more about these types of policies in our guide to with profits funds. 

How much compensation will I get?

Individual and group accumulating with profits plans, and conventional with profits policyholders, will receive compensation payments equivalent to 22.4% of their losses. So if your loss was £10,000, you'll receive £2,240 under the scheme.

Analysis of the figures from the Commission on Equitable Life Payments shows that the highest proportion of policyholders (20%) will receive between £100 to £250 in compensation, accounting for nearly 200,000 policyholders.

But closer analysis of the figures shows that more than half of those affected by the Equitable Life saga will receive £250 or less in compensation. Of the 945,024 policyholders eligible for compensation, 532,977 will receive up to £250. On the other end of the scale, 43 claimants are eligible for more than £250,000 in compensation, although all but one of these refer to group schemes. 

How will I be paid my Equitable Life compensation?

For individual and group accumulating with profits plans and conventional with profits plans, the payment scheme will repay policyholders with a single lump sum. Payments will be free of income, capital gains and corporation tax. Payments will, however, count towards your estate for inheritance tax purposes, although payments to those who have died before receiving compensation will not be subject to inheritance tax.

What about compensation for with profits annuities?

If you have bought a with profits annuity from Equitable Life in the eligible dates, you will be compensated in full. Past losses will be spread out over the next five years. Future losses payments (what you would have got if you'd bought a comparable annuity) will begin in the next 12 months and will be paid until you die (or until your spouse dies if you have a joint annuity).

When will I get compensation for my Equitable Life policy?

As previously, the oldest Equitable Life policyholders will be compensated first. It’s hoped that these payments will start by the end of June 2011 and be paid by June 2012. The government is also prioritising the estates of policyholders that have died without compensation. This may, however, be delayed, given the difficulty of tracing the estates.

Where should I apply for compensation?

The scheme will be contacting all members affected within the next 12 months, advising you as to how much you stand to be paid in compensation and when you'll receive payment. You will not need to make a claim yourselves.

Group policyholders may not receive any contact from the scheme until after June 2012.

Where can I get more information?

The Treasury has set up a website and a helpline. You can find out more on the Equitable Life Payment Scheme website, and call the helpline on 0300 0200 150.