Equitable Life compensation demanded
- 6 September 2010
- From the section Business
Pensioners hit by the Equitable Life scandal are to make a final attempt to persuade the government to pay them full compensation.
The Equitable Members Action Group (EMAG) is sending proposals to ministers before next month's decision on how much they will receive.
The company's board is also writing to the Treasury with its own submission.
Losses have been put at nearly £5bn, but the Equitable's investors fear they may be offered just a tenth of that.
"It can't be right that policyholders are subject to a 90% haircut," said the Equitable's chief executive Chris Wiscarson.
After a decade of argument about how much compensation should be offered to about 1.5 million people, the coalition government will announce its proposed payout total alongside its public spending review in October.
It has already asked an independent commission to work out the best way to distribute the final compensation amount among the eligible Equitable members.
That commission will report in January with the payments starting in the middle of next year.
The current and the previous government have both been under intense pressure to follow recommendations, made in 2008 by the Parliamentary Ombudsman.
She said the Equitable's investors should be fully compensated for the losses they had suffered due to official failure to properly regulate the Equitable in the 1990s.
However, the previous Labour government tried to resist this, and campaigners fear the new government will take the same approach.
The fate of the pension payments hangs in the balance as ministers mull over their decision on compensation.
Some pensions are already being drawn, while some policyholders are still saving.
One Equitable pensioner is 82-year-old John London from Leicester.
All his life savings went into the company and he says he has seen a drastic decline in his standard of living after his pension fell by nearly 60%.
"All my dreams of travel and holidays have flown out the window," he explained, "we struggle to get by."
Mr London points out that on average, 15 Equitable policyholders die every day, which makes the wait for compensation hard to bear.
"Unless something happens very soon, it is unlikely that I shall live long enough to see any payment," he said.
Sir John Chadwick, a former High Court judge, had been asked by the Labour government to devise a limited compensation scheme which would benefit only those worst affected by the Equitable's near-collapse in 2000.
He recommended in July that ministers might only pay between £400m and £500m in compensation.
Treasury Minister Mark Hoban said the government in fact agreed with the Ombudsman's much fuller compensation recommendations.
But he also indicated that Sir John's proposals might influence the government's thinking.
"The scheme will be a significant spending commitment for this government and cannot be considered in isolation from the other spending decisions that it will need to make over the coming months, and what is affordable in that context," Mr Hoban said in July.
Equitable Life nearly collapsed in 2000 after failing to put sufficient funds aside to pay for guaranteed payouts it promised on some of its pensions.
They were policies it had been selling from the 1950s until 1988.
Equitable savers have seen the value of their investments slashed, including some of those who were already receiving a pension.
"The government should respect the Parliamentary Ombudsman's recommendations," said EMAG spokesman Paul Weir.
"It should dispose of the work of Sir John Chadwick, which we think is disgraceful.
"And they should pay proper compensation, not peanuts," Mr Weir said.