Almost a million Equitable Life policyholders will be handed less than a quarter of their relative financial loss 10 years after the firm hit major problems.
The Independent Commission on Equitable Life Payments’ report, published last Wednesday, recommended that 945,000 non-with-profits savers should get 22.4 per cent of their relative loss, with the £775m compensation pot divided on a pro rata basis. These savers can expect, on average, £820 each. The remaining 100,000 policyholders who incurred relative losses will receive no payment because their pro-rata allocation amounted to less than £10.
The commission said such small payments would incur “disproportionate” administrative costs and would be of “negligible significance” to recipients.
The Treasury confirmed that the oldest victims and estates of deceased policyholders will be given priority in the order of payment.
Treasury financial secretary Mark Hoban said: “We have always been committed to making fair and transparent payments to Equitable Life policyholders through an independently designed payment scheme for their relative loss as a result of regulatory failure.”
Independent Commission chairman Brian Pomeroy said: “The commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent and fair for policyholders.”
The details of how non-with-profits annuitants will be treated follows last October’s confirmation that 37,000 with-profits investors will receive a total of £620m in compensation. With-profits investors suffered, on average, losses of £16,500 each.
The total compensation figure of £1.5bn represents around a third of the estimated £4.3bn relative losses.
In an interview with Money Marketing this week, Shadow work and pensions minister Rachel Reeves concedes that Equitable Life victims waited too long for compensation under the Labour Government.
She says: “I would say that people with Equitable Life policies have had to wait far too long to get the compensation they are entitled to. Additional compensation is welcome but I do not think it compensates for the losses they have had to endure.”