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Equitable compensation is &#39worthless&#39 after cuts

Compensation paid to Equitable Life policyholders over pension misselling

has been rendered almost worthless by the drastic with-profits fund cuts.

IFAs say much of the compensation received for pension misselling is now

worthless and believe the pension review is fatally flawed if companies

are able to reduce the value of contracts after compensation has been paid.

Equitable policyholders who had their compensation paid in to their fund

are now facing a 16 per cent cut, which could take them back to their

original position before redress was given.

The FSA has also come under fire for a lack of foresight in not taking

this situation into consideration.

IFAs have long argued that pension misselling compensation should be

calcuated at retirement because only then can the full extent of the loss

be known.

One IFA has a client who received £12,000 compensation from Equitable

but has lost a total of £30,000 from his £180,000 fund through

the reductions.

Although the whole value of the policies has come down, Equitable claims

that the fund cuts only come from reductions to the part built up by

terminal bonuses.

Independent Personal Financial Management principal Luke Gibbon says:

“Equitable gave bad advice and paid compensation but this has now been

taken away so the compensation is worthless. Clients may now be back in the

position they were in before the review. Compensation should be calculated

at retirement.”

Moffatt & Co Chartered Accountants IFA Adam Rowbottom says: “If they give

compensation in one respect and then reduce bonuses, it makes a mockery of

the whole concept. The assumptions that they made about the returns they

were going to make must have been ridiculous. If this is then cut, what&#39s

the point of compensation?”

FSA spokeswoman Jackie Blyth says: “Compensation is calculated, paid,

accepted and settled at the time. We have to operate a system which has

closure. What happens afterwards is about the performance of a fund.”

An Equitable spokesman says: “We regret reducing bonuses but it was

necessary.”

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