Page last updated at 10:46 GMT, Tuesday, 5 January 2010

Equitable Life bonuses improve savers' policy values

Equitable Life sign
The Equitable still has about 400,000 savers

The troubled Equitable Life pension company has given its savers a rare piece of good news.

It has reversed last year's cut in their policy values and awarded them an interim bonus.

The Equitable's with-profits pension savers will receive a 3.5% interim bonus on their polices while last year's cut of 2% is being reversed.

Savers in its other life funds receive a 2.8% interim bonus, and a further 1.6% to reverse a cut made last year.

"The society is determined to recreate value for policyholders and these increases in policy values are small but important steps along this road," said Chris Wiscarson, Equitable Life's chief executive.

Improved returns

The decision to improve policy values reflects two things.

Investment returns improved in the second half of the year, and the society has freed £100m from its reserves as a result of a recent decision to contract out its administration to the HCL insurance services company from 2011.

January 1999: Equitable tries to abandon making guaranteed payments 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

The Equitable closed to new members in 2000 after the High Court forced it to make good a promise it had made to some policyholders which it could not afford.

The decision pushed the society to the brink of insolvency and it has been struggling to recover ever since.

The most recent stage of the long-running saga saw the government agree to widen the scope of a forthcoming compensation scheme for some of the society's members who lost money in the aftermath of its near-collapse.

The much-reduced society has about 400,000 policyholders who are still saving with it.

About 180,000 people have individual policies while the rest are members via group policies, such as those offered by their employers' pension schemes.

"This announcement covers almost every one of our policyholders" said an Equitable spokesman.

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