Policyholders with Equitable Life, the beleaguered life assurance company that lost its customers over £4 billion through mismanagement and poor regulation, will receive less than a quarter of their losses when the coalition government pays them compensation later this year.
The Independent Commission on Equitable Life Payments, set up by the government to advise on a compensation scheme for Equitable Life members, published its recommendations last week. In the report, it recommended that the 945,000 policyholders who lost out through the Equitable Life saga would receive compensation equivalent to 22.4% of their losses. It also suggested that 95% of policyholders eligible for compensation aged 75 or over should receive payments in the first year of the scheme.
The Treasury department has accepted the Commission’s recommendations.
What were the Commission on Equitable Life Payments key recommendations?
In October 2010, Chancellor George Osborne confirmed that the coalition government would repay £1.5bn in compensation to Equitable Life members for the poor administration and regulatory failures that caused over a million policyholders to lose out on £4.3 billion.
The Commission decided that the best way to compensate Equitable Life policyholders would be on a pro-rata basis, with each member that had suffered receiving 22.4% of their losses. This would equate to approximately 945,000 policyholders.
It also stated that it would not repay any losses of less than £10. This will mean that 100,000 policyholders do not receive a payout.
Priority has been given those aged 75 and over to receive payments in the first year of the scheme. The Commission will also prioritise the estates of deceased Equitable Life members, stating that 70% will receive compensation in the first year, while it also estimates that all policyholders over the age of 60 will receive compensation within the first 12 months of the scheme.
This is in addition to the 37,000 with profits annuitants who will be compensated in full for their losses.
How much will Equitable Life members realistically be receiving?
According to the Commission’s figures, 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 policyholders are eligible for more than £250,000 in compensation.
How do you know if you’re in line for an Equitable Life payout?
The period for calculation of losses is defined as between 1 September 1992 and 31 December 2000. If you were paying into an Equitable Life policy between these periods, or your policy matured during these periods, you could be in line for compensation. But you have to have been paying into the Equitable Life with profits fund.
If you are still paying into an Equitable Life policy, you will be compensated based upon your projected Equitable Life payout, and the projected payout from another with profits fund.
When will Equitable Life compensation payouts begin?
The Treasury has accepted the findings of the Independent Commission on Equitable Life Payments and will present the details of the compensation scheme in Spring 2011. Once approved by Parliament, it will provide further details on how to make a claim.
When this comes, Which? will provide a full guide to how to claim compensation on Which.co.uk.
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