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Equitable investors set for £1.5bn payout

Equitable Life policyholders are set to be handed £1.5bn in compensation 10 years after the collapse of the insurer, reports suggest.

Investors who lost money will receive around a third of Parliamentary and Health Service Ombudsman Ann Abraham’s initial recommendation of between £4bn and £4.8bn compensation when George Osborne announces the outcome of the Comprehensive Spending Review on Wednesday.

However, the figure is £1bn higher than Sir John Chadwick’s recommendation of £400m – £500m made in July this year.

Hargreaves Lansdown head of pensions research Tom McPhail says policyholders should “take the money and move on”.

He adds: “Undoubtedly many Equitable investors will still feel let down by this settlement, having been led by the Parliamentary Ombudsman to expect a compensation package of somewhere nearer to £5bn.

“If a settlement had been made before 2008 the  it might perhaps have delivered a more generous outcome but the world has changed, across the economy spending is being cut, taxes are rising and jobs are being lost.”

This follows the publication of a report from the Public Administration Committee last week urging the Government to avoid basing its decision on the timetable of the CSR.

The report says: “We regret that despite the Government’s commitment to meet the Ombudsman’s recommendations that it did not properly explore the possibility of amending Sir John’s terms of reference back in May. Had this change been made then it would not have significantly altered the timescale for delivering compensation.

“We therefore recommend that the Government re-engages Sir John Chadwick to establish what conclusions he would reach under terms of reference which reflect all ten of the Ombudsman’s findings.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. I wonder if this improved offer would have been made if some of those who have ‘lost’ money (and it is questionable if anyone has actually lost any money) weren’t made up of Tory and LibDem voters (solicitors, accountants, teachers etc).

  2. So Equitable mamagement pay higher Bonuses, and give greater guarantees than their competitors felt would be prudent.

    Customers kid themselves that they’re being smart by seeing an Equitable Salesman and ‘cutting out the middleman.

    These customers, (certainly the ‘professionals’ amongst them) are happy while Equitable mamgement continue to dole out the family silver, but squeal loudly when it becomes apparent that the cupboard is bare, because they’ve eaten all the cakes.

    Because the are articulate and present their case well, and because the regulators are afraid of a backlash, and not least, because of Tory Shires influence, the tax payer is now to reward these people because of.. what?

    Losses? – No not really. They just had their bonuses early.

    Being misled? – How? Equitable quoted in the same way as other Companies, both pre and post Financial Services Act.

    Because the contracts failed to deliver their expected outcome? – Well if that’s the case, where do the policyholders of every other Life Office trading in the UK between 1970 and 2010 join the queue?

    This is smply MISGUIDED AND WRONG!.

  3. Why are equitable policy holders receiving compensation from the government and Keydata investors from the IFA sector?

  4. Equitable life was recommended by the Daily Mail, so must be good.

  5. And what contributions towards this compensation fund are going to be required from any FSA or PIA people? It was, after all, on their successive watch that the ship went down.

    Oh, I forgot ~ the FSA holds everyone else to account but no one ever holds anyone at the FSA to account.

  6. As far as I recall. and I may be wrong, Equitable did NOT quote the same as any other company etc. They invariably projected higher returns because their acquisition costs were shown as being much less than many other companies; this was rationalised by asserting that they did not pay commission to IFAs.

    For some reason the commissions paid to their own staff were not included on the overall costs displayed on their quotes (with, as far again as I recall, the full backing of whoever was the regulator at that time), so the quotes showed up better

    Anyone else recall this aspect?

  7. On Bair Cann’s point, pre Financial Services Act, (FSA 1986) which is when most of their business was done, all Companies quoted in accordance with the Life Offices Association (LOA and ASLOA) guidelines, which simply restricted the projection to the Company’s current Bonus rate so, given that Equitable were putting more to Bonuses and less to reserves, meant that their projections were greater.

    Buying the Business? Yes of course, but the projections were on the same basis as others.

    Post introduction of the FSA 1986 in 1988, all projections were on a proscribed basis for a period, I believe until the demise of the PIA, when some flexilbility to reflect the Companies own interpretation of their charges was introduced.

    Commission to their Sales force had to be included in their expenses, just as all their staff costs and other aquisition costs had to be, or should have been.

    By then though, the damage had been done, and the company mismanaged over several decades.

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