Commission's report outlines Equitable Life payments
The Treasury's Independent Commission on Equitable Life Payments' Report said the oldest policyholders should receive compensation first, followed by the estates of deceased policyholders and the estates of those who die before receiving payment in the next three years.
The 130-page report recommends that around 945,000 policyholders should receive payments equivalent to 22.4 per cent of their relative losses while the remaining 100,000 policyholders with relative losses should receive no payment because their proportionate allocation amounts to less than £10.
The report also said that almost 70 per cent of 11,250 known eligible estates could receive payment in the first year; while 95 per cent of all eligible policyholders over the age of 75 could receive their payment in the first year of the payments scheme.
All eligible policyholders aged more than 60 with individual, as opposed to group scheme, policies could receive their payment in the first year.
The Treasury will publish a scheme design document setting out the practical implications of the recommendations along with a timetable for making payments It will also include details of the complaints and challenges procedure.
Mark Hoban, financial secretary to the Treasury, said: "We have always been committed to making fair and transparent payments to Equitable Life policyholders through an independently designed payment scheme for their relative loss as a result of regulatory failure.
"I am grateful for the work the commission has done to establish policyholders’ concerns and have used this to recommend the principles of the payment scheme. I welcome their recommendations and we will now use them as the basis for making payments to policyholders.
"I would like to thank Brian Pomeroy, John Howard and John Tattersall for all their hard work on this issue, which helps bring us a step closer to resolving it."
Mr Pomeroy, chairman of the commission, said: "The government has accepted all our recommended principles. The commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent and fair for policyholders."
The commission, set up by the Treasury in May 2010, was asked to provide advice on how funding of the £775m compensation bill should be allocated in the next three years.
In October the government pledged to make about £1.5bn available for the Equitable Life Payments Scheme.