Equitable mis-selling probe launched

Equitable's rescue package was approved recently

Equitable Life has announced an independent review of allegations by some policyholders that they were mis-sold financial products.

Our process must be both fair to our continuing policyholders and give justice to those who have left the Society

Charles Thomson, chief executive of Equitable Life

The actuary firm B&W Deloitte will look at claims made by some policyholders that they were mis-sold products because they were not told about huge liabilities the society faced from other policyholders who held pensions with guaranteed returns.

In 1999, it emerged that Equitable Life could no longer afford to honour those policies with Guaranteed Annuity Rates (GARs), a situation which eventually meant it had to close to new business in December 2000.

After a long period of turmoil, a rescue package aimed at ending the society's £1.06bn pensions liability was recently rubber-stamped by the courts.

Compensation chance

Before the rescue package was approved many thousands of policyholders transferred their money out of the Equitable Life.

Only those policyholders without GARs who left the society before the compromise deal was approved will be included in the review.

Under the terms of the compromise deal, people with GARs agreed to give up their rights to guaranteed returns in exchange for a one-off 17.5% boost to the value of their investments.

Non-GARs were given a 2.5% increase for agreeing not to sue the society.

Former non-GARs will have to prove that they were mis-sold their policy and that they have suffered a direct loss as a result of the GAR liabilities and not because of recent stock market falls.

Moving on

Equitable is determined to clear up any claims of mis-selling quickly and efficiently.

"Any compensation paid to former policyholders can only come from the funds of continuing policyholders. Given that, our process must be both fair to our continuing policyholders and give justice to those who have left the Society," said chief executive Charles Thomson.

"While there may be former policyholders with justifiable GAR-related mis-selling claims that warrant compensation, we believe that the number and scale of successful claims should not be extensive," he added.

"A large number of criteria have to be met before any claim is valid."

But the Equitable Life Late Joiners Action Group dismissed the mis-selling probe, and called on whistle blowers to reveal the scale of "deception" between 1998 and 2000.