Equitable Life payments to start in June, Treasury says
Compensation payments to savers in the collapsed Equitable Life pension company will start by the end of June.
The Treasury has announced the details of the repayment scheme, which will be run by National Savings and Investment (NS&I).
It will offer £775m to about 945,000 policyholders, while £620m will be shared among 37,000 with-profits annuitants.
The payments will be spread over five years, with £1bn paid by 2014.
The oldest policyholders will be paid first, receiving £500m during this financial year, while £300m will be paid in 2012-13 and £200m the following year.
The Financial Secretary to the Treasury, Mark Hoban, said: "This is a complex issue, but the scheme has been designed to reflect the principles of fairness, transparency and simplicity."
The timetable was criticised by the Equitable Members' Action Groups (Emag).
"The compensation letters that are to go to victims will be spread out over 12 months - so many people will not know what's happening for at least a year," said an Emag spokesman.
About 100,000 policyholders will not receive any money as they lost less than £10 each - too little to be repaid in the light of the administrative costs.
Meanwhile a further 435,000 policyholders have been judged not to have suffered any losses.
The Treasury said all policyholders due a payment would receive a letter before June 2012.
That will tell them how much they will get and approximately when they will receive it.
However, those not due anything will not be contacted at all.
The Treasury said there would not be any faster payments for those in hardship.
"The scheme will make all reasonable effort to avoid unnecessary delays in making payments," the Treasury said.
"However, regardless of circumstances, payments cannot be brought forward on grounds of hardship."
Although the government said the policyholders had suffered "relative losses" of £4.1bn, it has decided it cannot afford to repay that sum.
So while the with-profits annuitants will be repaid all their losses, the other savers will be repaid just 22% of their losses.
Relative loss is defined as "the difference between the actual returns received, or expected to be received, from Equitable Life and the assumed returns that the policyholder would have received if they had invested in a similar product in a comparable company", the Treasury said.