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Working Lunch Monday, 12 May, 2003, 15:05 GMT 16:05 UK
Step closer to Equitable payouts
The Financial Ombudsman Service is on the verge of telling Equitable Life which customers could be due for compensation because of mis-selling.

The Service has received thousands of complaints and is considering a number of lead cases to establish what sort of liability can be put at Equitable's door.

The claims arise out of the financial crisis at Equitable Life which left policyholders with shrinking investment plans and pension policies.

Compromise

Most customers - or members, as Equitable likes to call them - have gone along with a compromise arrangement under which they gave up their rights to pursue legal claims against the life assurance society.

In exchange they were given an uplift in the value of their policies, clawing back a little of the money they had already lost.

But those who had already cashed in their policies, or transferred them to other companies, were excluded from the compromise and remained free to press complaints about the way they had been treated.

Equitable has already conceded that 70,000 former members could have a claim.

Full ruling

The bill for compensating them has been estimated at between 45m and 75m.

The Ombudsman Service is expected to issue adjudications in the lead cases within the next few weeks.

Equitable can then appeal and seek a full Ombudsman ruling.

Those who were persuaded to start policies after 1998 are expected to have the strongest cases.

It's thought that by then the crack in the society's financial structure should have become plain to senior managers.

Debate

There is likely to be a fierce debate over the amount of money to be paid out to aggrieved policyholders.

The Ombudsman Service may not spell out a formula to calculate payments.

Equitable has already given notice that it will pay either 5% on top of policy values or a sum to make up the difference with comparable policies from other providers - whichever sum turns out to be smaller.

However, the Equitable Late Joiners Action Group has been campaigning for full reimbursement of the original sum invested, plus interest.

Not satisfied

"We've lost capital", says Paul Weir from the group. "We were misrepresented - we should never have been sold those policies."

It's still open to former members to lodge complaints.

They should start by approaching Equitable itself, then complain the Financial Ombudsman Service if they are not satisfied with the result.

Customers have three years to complain, counted from the time that they might reasonably have been aware that they had a grievance.

In the Equitable's case the key date could be 8 December, 2000, when it was forced to close its doors to new business.

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