Page last updated at 17:53 GMT, Thursday, 15 January 2009

Relief plan for Equitable victims

Rodger Watts lost thousands invested in Equitable Life

The government will compensate those policyholders "hardest hit" by the collapse of life insurer Equitable Life, the Treasury has announced.

Minister Yvette Cooper also apologised to the million-and-a-half policyholders who had lost money.

A former appeal court judge will advise the government on who will receive payment and how much.

Opposition MPs and campaigners, however, have said the scheme does not go far enough.

Liz Kwantes, of the Equitable Life Members Help Group, said she was worried about further delays.

"By the time they decide how to measure it, we've lost another year," she said.

"A lot of people have lost a lot of money. People have had a hard time - some have lost houses, their health has gone," she added.

Regulatory failure

More than eight years after the Equitable closed to new customers, the government has admitted that some regulatory bodies were partly to blame.

"We agree there has been maladministration in several areas and that government action is merited," said Ms Cooper.

"And I wish to apologise to policy holders on behalf of the public bodies and successive governments responsible for the regulation of Equitable Life between 1990 and 2001, for the maladministration we believe has taken place," she told MPs.

We want to focus on those who have been hardest hit

Yvette Cooper, Chief Secretary to the Treasury

This was highlighted in a critical report published last year by the Parliamentary Ombudsman, Ann Abraham, who called on the government to establish a compensation scheme.

It is thought that more than a million of the 1.5 million people who had Equitable polices in 2001 have seen the value of their investments slashed, in some cases by as much as 50%.

However, it is not yet clear who will be offered any money, or how much.

In addition, Yvette Cooper told MPs that any eventual payments would still have to "take account of the position of the public finances".

Liberal Democrat spokesman Vince Cable called on the government to go further.

"After bailing out both Icelandic and nationalised bank depositors, Equitable Life investors will not be able to understand why they are being treated less favourably."

Conservative spokesman Mark Hoban said the scheme was "about means-testing a compensation rather than compensating people for injustice."

Management responsibility

Ms Cooper pointed out that the official report by Lord Penrose in 2004 had pinpointed the society's management as being mainly responsible for its financial problems.

January 1999: Equitable tries to abandon a guaranteed payment it can no longer afford
July 2000: The House of Lords says Equitable must honour its original commitments, forcing the company to put itself up for sale
December 2000: Equitable Life closes to new business after failing to find a buyer
March 2004: Lord Penrose's report says the society was the "author of its own misfortune"
July 2008: The Parliamentary Ombudsman says regulators failed to protect policyholders and calls for a compensation fund

And she told MPs that policyholders could not expect to be fully compensated for all their losses.

The former appeal court judge Sir John Chadwick has been asked to advise how the payment scheme should work.

He has been asked to advise the government "as swiftly as possible" on the extent of relative losses by the Equitable policyholders, the payments that might be due to any maladministration, and which groups of policyholders had suffered most.

"We want to focus on those who have been hardest hit," Ms Cooper told MPs.

"We would expect it [the scheme] to include looking at the extent of somebody's losses, how great the losses were but also perhaps looking at how great they were as a proportion of their income," she explained.

Vanni Treves, the chairman of Equitable Life since 2001, offered a "muted welcome" to the plan, and said he would help by offering advice to Sir John, as well as full access to the society's records.

But he said it would be wrong for there to be any element of "means testing" in the eventual payouts.

"The Ombudsman was very clear that losses that were suffered by huge numbers of policyholders should be made good, independent of the financial situation of individual policyholders," he said.

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