Life Insurance  

Equitable Life scheme under fire from MPs

The public accounts committee’s damning 44-page report, Administering the Equitable Life Payment Scheme, claimed the government failed to “learn lessons” from previous compensation schemes, leading to administrative failures and payment delays for policyholders.

The compensation scheme was set up in 2010 but by March this year only £577m had been paid to 407,000 policyholders. The scheme will close in March 2014 and the Treasury still has to make 660,000 more payments worth £370m. No publicity for the deadline in 2014 was planned before September 2013.

Margaret Hodge MP, chairman of the committee, described the deadline as “arbitrary” and said: “It is completely unacceptable that more than 10 years after the collapse of Equitable Life so many victims still have not received the compensation to which they are entitled.”

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A report by the National Audit Office in April revealed that as many as 20 per cent of policyholders – between 200,000 and 236,000 people – might not receive any money because the Treasury could not trace them, while approximately only 35 per cent of policyholders have so far received any form of compensation.

The scheme decided not to keep data on more than 350,000 policyholders from the Equitable Life Members’ Action Group due to data protection concerns.

The committee’s paper also criticised National Savings & Investments, the Treasury’s administrator which outsourced the scheme to Siemens, which subsequently sold its contract to Atos.

It claimed that Atos was not being paid in line with its performance and warned that it could pass on unnecessary costs to NS&I.

Key recommendations of the report

• The government should undertake a “lessons-learned” exercise and report back to the committee

• Improve control over the costs of administering the scheme

• Look again at how to trace policyholders

• Bring forward planned publicity on the closure of the scheme

Adviser View

Daniel Cawley, partner of East Sussex-based 121 Financial Services, said: “It’s unsurprising that the government tends to fall behind on its promises and run over costs, and this scheme is no different.”