It found that just £577m worth of payments had been processed by March 2013 – less than half of the required payments. Citing incomplete and out-of-date policyholder information, the report stated that 407,000 payments had been made to date, with a further 667,187 left to be paid.
The NAO report also said between 17 and 20 per cent of policyholders will not be found, despite attempts to trace them.
Continued efforts to trace policyholders could also lead to an overspend in the scheme’s administration budget of around £1.5m. Some 1.46m policyholders are eligible for compensation.
The compensation scheme, which is administered by National Savings & Investments, announced in March that it was considering running an advertising campaign in an attempt to reach claimants it had been unable to trace.
Margaret Hodge, chairman of the Commons Public Accounts Committee said the compensation scheme had gone “off track” as a result of the government’s “desperate rush” to start making payments in 2011, while NAO head Amyas Morse said the government had failed to take on the lessons of administrating other compensation schemes.
Paul Weir, spokesman for the Equitable Life Members’ Action Group, said: “This report confirms what we suspected – the government failed to hit the ground running at the start.
“It is shocking that up to 200,000 victims may never get their money. The Treasury turned down EMAG’s offer of 320,000 names and addresses from our own cleaned list, and then duplicated the same exercise.
“I’m still hearing from people who are traceable, who have called the scheme and haven’t had a cheque.”
January 1999: Equitable Life launch proceedings seeking approval to abandon guaranteed payouts to policyholders it could no longer afford.
July 1999: Policyholders launch an appeal against the plans.
September 1999: Equitable wins initial legal case, with court ruling it acted lawfully.
January - July 2000: Court of Appeal reverses decision, later upheld by House of Lords.
December 2000: Equitable closes to new business after failing to find a buyer.
March 2004: Lord Penrose’s report is published and claims the society’s former management team was guilty of nurturing a “culture of concealment and manipulation”.
July 2008: Parliamentary Ombudsman says regulators failed to protect policyholders and calls for a compensation fund to be established.
July - October 2010: Government announces payouts will begin in mid-2011. Chancellor says compensation of £1.5bn will be paid.
Peter Dubber, owner of Northamptonshire-based DNG Financial Solutions, said: “IFAs would not get away with not being able to trace people, I think it’s a feeble excuse, and the cynic in me would say that the longer it takes to trace these people, the more will have died and the Treasury will have to pay less.”