Equitable Life: New compensation plan announced
An enhanced compensation scheme for over one million Equitable Life members has been announced by the two parties forming the UK's coalition government.
The savers lost money after the pension company's near-collapse in 2000.
The coalition agreement says they will be compensated for their "relative loss", as recommended by the Parliamentary Ombudsman.
This goes much further than the limited scheme being devised at the request of the former Labour government.
After the Equitable closed to new business in 2000 more than a million policyholders suffered large cuts to the value of either their prospective or current pensions as the society struggled to stay solvent.
Paul Weir, spokesman for the Equitable Members Action Group, welcomed the new government's commitment.
"After 10 years of denial and obstruction by the previous administration it's been a long time coming," he said.
"Sadly many thousands of Equitable pensioners have died without justice, sacrificed on the altar of Gordon Brown's defence of 'lite touch' regulation."Agreement
In a seven-page document, the Tories and Lib Dems have outlined the key issues on which they agree as part of a coalition government.
- January 1999: Equitable tries to abandon making guaranteed payments it can no longer afford
- July 2000: The House of Lords says Equitable must honour its original commitments, forcing the company to put itself up for sale
- December 2000: Equitable Life closes to new business after failing to find a buyer
- March 2004: Lord Penrose's report says the society was the "author of its own misfortune"
- July 2008: The Parliamentary Ombudsman says regulators failed to protect policyholders and calls for a compensation fund
Within it is a single paragraph that will be welcomed by campaigners who have called for fuller compensation for Equitable Life members.
"We agree to implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure," it reads.
Alistair Dunbar, of the Equitable, said: "This does look very positive.
"We look forward to working with the new government to help them to deliver a payment scheme that is swift, simple, transparent, fair and seen-to-be fair. Our policyholders have been waiting long enough."'Regulatory failure'
In July 2008 the Parliamentary Ombudsman, Ann Abraham, published a report which pinpointed "a decade of regulatory failure" as being one of the main reasons for the collapse of the pension company.
She called on the government to set up a scheme to compensate the savers for the maladministration and their losses.
"The aim of such a scheme should be to put those people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred," she said at the time.
However, the Labour government proposed a less wide-ranging scheme.
Last October, the High Court approved the government's plan for only limited payments to those who had lost money "disproportionately".
A former High Court judge, Sir John Chadwick, has been trying to design a payment scheme to meet the government's aims, and his work has been ongoing until now.
"I welcome the commitment the new government has made in its coalition agreement today to implement the recommendations I put forward for the compensation of Equitable Life policy holders," said Ms Abraham.Other issues
Among the other key personal finance issues outlined in the coalition document are:
- Reductions to the Child Trust Fund and tax credits for higher earners
- An independent commission being set up to review the long term affordability of public sector pensions, while protecting accrued rights
- Restoration of the earnings link for the basic state pension from April 2011 with a "triple guarantee" that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats
- An increase in the personal allowance for Income Tax from April 2011
- The phasing out of the default retirement age
- A review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
- An end to the rules requiring compulsory annuitisation of personal pension savings at 75.
Conservative Prime Minister David Cameron described the agreement as marking a "remarkable and welcome day".
Deputy Prime Minister, and Liberal Democrat leader, Nick Clegg admitted there would be some "bumps and scrapes" over the course of the arrangement but insisted the parties had a "common purpose".