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Equitable Life to give cash to thousands of policyholders

Equitable Life to give cash to thousands of policyholders

Troubled Life insurer Equitable Life is to offer its policyholders thousands of pounds in cash from the reserves it has built up since its near-collapse in 2000.

The insurer is to write to some 300,000 policy holders informing them of the process, although it will not specify how much money it will pay out at this point. 

The money offered won’t cover the capital lost by the clients in the years leading up to the Millennium when mismanagement at the firm had almost caused the insurer to collapse.

The firm said any payments made are not linked to 'compensation', they were payouts from its capital reserves.

The insurer had already stated on its website it was looking to increase the 35 per cent payout it is currently making to its clients.

In a statement ahead of its upcoming Annual General Meeting in May, it said: “The Equitable Life board has a duty to explore options to recreate value for with-profits policyholders and, in particular, is investigating ways to increase the 35 per cent capital distribution.

“We are determined to distribute greater amounts of capital to policyholders, and we are hopeful of being able to give some good news in advance of our Annual General Meeting.”

Equitable Life had found itself locked into paying out high interest rates promised at a time of high inflation - in the 1970s - at a time of low inflation and interest rates, when it found it hard to fund those commitments.

The debacle led the UK government to pay back £1bn to eligible policyholders by the end of 2014.

The Equitable Life payment scheme closed to new claims on 31 December 2015.

Though getting smaller each year, the company still manages more than £6bn in assets for 300,000 policyholders, largely in with-profits funds.

The firm is believed to be looking for a buyer. It emerged last week (1 March) Goldman Sachs had been hired as part of a review at the firm.

Alan Chan, director at IFS Wealth & Pensions, said the payments were a case of "too little too late".

He said: "I liken Equitable Life to a dinosaur within the financial services industry that’s clearly out of place and not fit for the current times. It’s only a matter of time before they too become extinct.