Wealthy Equitable Life victims could receive six-figure sums
Equitable compensation scheme triggers row over public money
Britain might have entered an age of austerity but some wealthy victims of the Equitable Life scandal are in line for six-figure compensation payments, and a few policyholders could pocket 1m of public money, it emerged today .
The Treasury announced that 945,000 Equitable Life policyholders are set to share 775m in government compensation, with individual payouts beginning at 10.
However, the proposals could trigger a row because a report from experts advising ministers suggests 30m of the cash will be shared by just 42 policyholders, all of whom would receive more than 250,000. The 30m averages out at 720,000 per person, suggesting some of them could end up receiving 1m or more.
The Treasury argued that, while the report referred to the 42 as "policy holders," these were not individuals but "group pension" policies which could cover a number of workers. However, with 504,000 policyholders, that would imply that Equitable were managing the pension of more than half a million companies, a figure that critics say is unrealistic.
"In many group schemes a single policyholder will represent many individuals' investments," said the Treasury.
At the other end of the spectrum, around 100,000 policyholders who suffered a loss will receive nothing because the compensation payments due to them are less than 10 each. The independent commission advising ministers has decided not to recommend a cap on the maximum payout that someone can receive, even though it accepted that some might take the view that "paying what might be seen as excessively large sums of public money to a small number of individuals would simply be wrong in principle". It added: "The commission believes this is a consideration outside its remit."
Last October, it emerged that investors who lost money as a result of the Equitable Life scandal would receive around 1.5bn in compensation. However, it was announced at the time that a l! arge chu nk of this sum would go to 37,000 elderly policyholders who had "suffered most". These people took out products called with-profits annuities.
The Treasury today published the commission's report on how the remaining 775m should be divided up between the remaining policyholders. It recommended that people should receive 22% of what they have lost.
It also proposed a minimum amount, in the region of 10, "beneath which payments should not be made," adding: "This reflects the commission's view that administering very small payments below this sum would be disproportionate to the administrative costs of making them, while being of negligible significance to recipients."
The Treasury has already indicated that the aim is that the first payments would be made by the middle of this year. Priority will be given to the oldest policyholders, "as they are least able to wait for payment," and the estates of those who have died.
The financial secretary to the Treasury, Mark Hoban, said: "We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme ... I am grateful for the work the commission has done to establish policyholders' concerns and have used this to recommend the principles of the payment scheme. I welcome their recommendations and we will now use them as the basis for making payments to policyholders."
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