Anger as government caps Equitable Life compensation

Published on Wednesday 21 July 2010 22:33

VICTIMS of the Equitable Life crisis are finally set to receive compensation next year but policyholders responded angrily after hearing they could get less than £500 each to cover their losses.

• Actress Honor Blackman was among the campaigners for compensation

A report published yesterday by Sir John Chadwick, tasked by the previous government with calculating the amount of compensation to be paid, recommended a total payout of 475 million to 650m. The figure fell well short of the 1 billion that the Equitable Members Action Group had expected Chadwick to recommend, and even shorter than the 5bn it claimed victims deserved.

The Treasury has now introduced a bill to parliament to enable compensation to be paid to policyholders. It has also formed an independent commission to work out exactly how the money should be allocated, with the findings to be revealed in January. Mark Hoban, financial secretary to the Treasury, yesterday said Equitable policyholders should start receiving compensation in the middle of next year.

But he said total compensation would be considered "in the light of what is affordable" as part of the government's October spending review, when the final compensation amount will be confirmed. "The scheme will be a significant spending commitment for this government and cannot be considered in isolation from the other spending decisions that it will need to make over the coming months, and what is affordable in that context," said Hoban.

He admitted that some of Chadwick's findings would be viewed as contentious and said the government would listen to representations by interested parties ahead of the review. The Equitable Members Action Group (Emag) claims victims lost almost 4.7bn when the insurer almost collapsed in 2000. The battle for compensation began when the insurer was forced to close to new business in 2000 after it lost a High Court decision over the rights of policyholders.

After a series of investigations, a 2008 report by the parliamentary ombudsman, Ann Abraham, called for the government to set up a compensation fund for policyholders who lost money.

The Labour government commissioned the report by Chadwick, which yesterday concluded that, while the absolute loss suffered by victims reached up to 3.7bn, the payouts should be capped at between 20 and 25 per cent of that, reducing the fund to between 475m and 650m.

Paul Weir, a director of EMAG, dismissed the verdict as "totally inadequate". "The government's compensation offer falls a long way short of what we were led to expect before the election and there will be no payments until next year. Fifteen Equitable savers are dying each day and we estimate about 50,000 have died during the last decade while we waited for justice," he said.

But Chris Wiscarson, chief executive of Equitable Life, welcomed the Treasury's decision. "The timetable, the transparency and the total amount stated for relative loss of over 4bn at last represent a proper basis for doing right by Equitable policyholders."