Equitable Life victims could get just £400m
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Equitable Life victims may get just £400m in compensation from the Government, financial secretary to the Treasury Mark Hoban revealed today.
The news comes as a result of a report published today by Sir John Chadwick, outlining recommendations for how payments should be calculated.
Chadwick recommended that the compensation should be capped at policyholders’ absolute loss of what their investments could have been worth if Equitable had not collapsed, which the report estimated to be £2.3bn to £3bn.
Chadwick said that policyholders should only get 25 per cent of this sum, bringing the total down to £475m-£650m, however because some policyholders made a gain as a result of the maladministration of Equitable, he said this figure should be reduced further to £400m-£500m.
In the run-up to the publication of the Chadwick’s report the Equitable Members’ Action Group expressed concern that the pay-outs might be slashed to £1bn, but today’s announcement reveals they could be even lower.
Hargreaves Lansdown pensions analyst Laith Khalaf says: “Equitable investors are probably now expecting the worst without bothering to hope for the best. It will be welcome news that the compensation scheme is finally being set up, but the amount of compensation paid looks likely to disappoint.”
The Government has also set up an independent commission to advise on the best way of allocating compensation to Equitable Life victims.
It has appointed Brian Pomeroy, John Tattersall and John Howard to form the commission.
Pomeroy is chairman of the Treasury’s Financial Inclusion Taskforce and member of the Financial Reporting Review Panel.
John Tattersall is former chair of the Financial Services Regulatory Practice and a senior client relationship partner at Pricewaterhouse Coopers LLP.
John Howard a former chair of the FSA’s consumer panel and was a member of the Mortgage Code Compliance Board, until its activities were taken over by the FSA in November 2004. He is also a non-executive director of the Financial Ombudsman Service.
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Readers' comments (6)
bill wells | 22 Jul 2010 2:13 pm
I suspect the total payout will be less that the money paid to the various investigators, lawyers and bigwigs at Equitable. Disgusting !
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Paul | 22 Jul 2010 3:39 pm
Is it really necessary to compensate everyone for whom something goes wrong? And we wonder why costs skyrocket. Caveat emptor, grow up and take responsibility for your decisions.
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Jack Morris | 22 Jul 2010 3:56 pm
Equitable life have been sailing close to the wind for years. They used to promise and give high returns on investments When their free asset ratio was miles out of sync.
They used to boast 'We do not pay commission to brokers, that is correct, their salesmen earned over £100.000 per annum 15/20 years ago.
The footsie index since 2000 has dropped by about 40%. They were running with dangerously low reserves prior to that. It was always a disaster waiting to happen.
Why did the FSA and previous regulatory bodies let them get away with it?
Jack Morris
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Peter Hart | 22 Jul 2010 4:29 pm
All politicians urinate in the same pot so I am not surprised Equitable policy holders will get next to nothing. Who do I vote for next time? My cat says less, smells better and is much more attractive. Problem solved.
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Gerry Cooper | 23 Jul 2010 9:06 am
Well said, Jack Morris and Paul.
A large proportion of Equitable policyhplders were and are professionals, predominently Accountants and Solicitors, articulate and intelligent people who nevertheless fell for the guff Jack describes.
It was also the case that a conspiracy of silence in the Actuarial profession helped Equitable to continue to operate irresponsibly.
The Appointed Actuary of the Company I worked for in the 70s and 80s contantly asserted, but off the record, that Equitable were paying out and guaranteeing more than they should. Perhaps the bigger failure, pre regulation, was at the Institute of Actuaries?
As for Peter Hart's point, this was never a political issue, and should not have been allowed to become one.
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Julian Stevens | 23 Jul 2010 10:26 am
The big con, if only by implication, was that no commission to third party intermediaries meant that investing with Equitable Life represented something if not for nothing then certainly for significantly less than what it would cost via the conventional channel. Those taken in by this proposition effectively ignored all other considerations and have since discovered that cost is by no means the only critical factor.
With this in mind, it does seem rather strange for the government to have tried to ram stakeholder pensions down the industry's throat on the premise that because they're cheap (but certainly no simpler than a regular PP), they'd all but sell themselves by the boatload. Look what happened there. Will policymakers ever learn?
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