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Chancellor urged to raise £2.6bn for Equitable Life victims

Chancellor urged to raise £2.6bn for Equitable Life victims

A group of 60 Conservative MPs has asked the Chancellor of the Exchequer to include a £2.6bn provision in the next budget to compensate Equitable Life victims.

In a letter sent to Phillip Hammond on Friday (7 September), seen by FTAdviser, the Tory members of the all-party parliamentary group (APPG) for justice for Equitable Life policyholders, said it was time the government "drew a line, by finally settling the long-running injustice of this scandal".

MP Bob Blackman, co-chairman of the APPG, wrote as the public finances returned to health, the time was right to "use the opportunity presented by the budget to finally right this lingering injustice".

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Mr Blackman made reference to an investigation conducted by the Parliamentary Ombudsman in 2008, which found that serial maladministration in the running of Equitable Life had led to more than 1 million pension savers suffering losses estimated to amount to £4.3bn.

He wrote: "Eight years on, 895,000 pensioners have received less than 23 per cent of their losses which the Parliamentary Ombudsman had directly attributed to regulatory failure.

"We continue to be aware that this short-changing has led to bitterness among many of our constituents. It has fuelled mistrust in financial regulators and it is in stark contrast to government bailouts of the big banks and building societies."

Equitable Life announced in June it is to transfer all its policies to Reliance Life, in a bid to boost capital distribution to customers by £1.8bn, equating to an average windfall of £6,900 for the 261,000 remaining policies.

The move is expected to complete at the end of next year, after being voted on by members in mid-2019, and is estimated to increase the current 35 per cent capital distribution on with profits policies to between 60 and 70 per cent.

But Mr Blackman wrote: "The Equitable Life scandal remains a significant unfairness – and one that the next Budget could and should address, by repaying the remaining 77.6 per cent victims’ relative losses and granting equal treatment to the pre-1992 annuitants.

"The £2.6 unpaid debt, if paid upfront but accounted for over a number of financial years, does not pose a threat to this government’s positive record of fiscal responsibility. Indeed, it would send a welcome message across the country – that the Conservative Party supports those who make prudent provision for their own retirement and is truly willing to right this injustice."

Difficulties at the world’s oldest mutual started in January 1994, when the society announced plans to cut the size of the final bonuses paid to its guaranteed annuity rate policyholders, after falls in interest rates and high inflation.

Equitable Life, which was established in 1762, closed its doors to new business after it failed to find a buyer in December 2000 and the Court of Appeal told the society it must honour its original commitments.

The debacle led the UK government to pay back £1.5bn to eligible policyholders by the end of 2014.

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