Hopes rise for Equitable payouts

Many members have a 'strong case' for compensation

The troubled life insurer, Equitable Life, is set to announce plans to offer compensation to former policyholders who may have been mis-sold pension and investment policies.

Thousands of customers left Equitable before the start of this year so they could keep the right to sue the society for failing to warn them of its financial problems.

A large number of these people are believed to have a strong legal case for compensation since an independent report into the company's problems ruled the Financial Services Authority failed to spot what was happening quickly enough.

If it did face further trouble Equitable would be as likely simply to make further cuts in the value of members' policies

Andrew Verity, BBC personal finance reporter

As a result, the insurer commissioned a report to find out exactly how much policyholders have lost and how much compensation it may have to pay out.

Equitable has already set aside £120m to cover mis-selling, part of which could be used to compensate those policyholders who left before the compromise deal was agreed.

The report by consulting actuary B&W Deloitte is expected to be published on Monday.

Meanwhile the company is dismissing suggestions it is filing for insolvency.

The BBC's Personal Finance Reporter, Andrew Verity, explained: "Like other companies, it has considered going into administration as one of a number of options should its finances deteriorate.

"But there's been no approach to an administrator.

"If it did face further trouble Equitable would be as likely simply to make further cuts in the value of members' policies."

Court battle

Equitable's problems began in 1999 when it found that it could no longer afford to pay long-standing policyholders the pension they had originally been promised when interest rates were higher.

The policyholders took the company to court when it tried to back out of its previous commitments.

Equitable Life lost the court battle and was left with huge legal bills, as well as being forced to pay the policyholders more than it said it could afford.

As a result, it was forced to close to new business in December 2000 and sold part of its business to the Halifax - now part of HBOS - last February.