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
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
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
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
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's
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