Equitable Life policyholders hit by £400m cap on payouts
POLICYHOLDERS of mutual insurer Equitable Life, which nearly collapsed a decade ago, face a £400m cap on compensation payments for their losses, the coalition government said yesterday.
The figure produced by an independent review is less than a tenth of the £5bn of
government compensation sought by policyholders.
Britain’s oldest mutual insurer, with 1.5m policyholders at its peak, almost collapsed in 2000 after being forced to honour unsustainable guarantees stretching back 30 years.
It eventually closed to new business in a historic financial scandal.
In 2008, parliamentary ombudsman Ann Abraham recommended payouts for more than a million policyholders who lost pension savings, but the then-Labour government said it could not offer full compensation.
The Conservative-Liberal Democrat coalition said shortly after coming to power in May that it would design a “swift, simple, transparent and fair” payout plan.
Yesterday Treasury Minister Mark Hoban said a review by government adviser John Chadwick had recommended restricting compensation to between £400m and £500m. Hoban said he would reflect on the numbers before publishing the final level of compensation in October.