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
- 2015 deadline for new claims confirmed
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.
By 2015 £1bn had been paid to 87% of eligible policyholders. The scheme will close to new claims on 31 December 2015.
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 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.
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 now contacted all 5,700 eligible group schemes and has data sharing agreements which cover 95% of group scheme members. 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 2015 Budget, the Government announced that it would make some additional payments to those who may have already received compensation. This applies to policyholders who don't have with profits annuities but are in receipt of Pension Credit.
These payments are due to be made in early 2016. No further payments are scheduled to be made to other policyholders.
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