Government Response After May 2010 General Election
In the Queen's Speech, following the formation of a Conservative-LibDem coalition government, the Equitable Life (Payments) Bill was announced. The bill will secure compensation for nearly a million policyholders (UK-wide) hit by the near collapse of the insurer Equitable Life. The Government also announced that the final report from Sir John Chadwick in relation to Equitable Life would be received by mid July. A statement on the HM Treasury website confirmed two elements of the design of the scheme: that there should be no means testing; and that the dependents of deceased policyholders should be included in the scheme.
The July 2010 announcement by Mark Hoban, the Financial Secretary to the Treasury offered compensation, starting by mid 2011 to 1.5m savers. However policyholder compensation would be limited to the "absolute loss they suffered" estimated by Sir John Chadwick at a total of £2.3-£3B, compared with the £4B-£4.8B returns that similar companies produced. Sir John, whose report was designed to compensate those who suffered "disproportionately" recommended a payment cap for each policyholder which would reduce total compensation to £400m - £500m. Hoban said compensation would follow recommendations of the Parliamentary Ombudsman report and would take Sir John's findings into account but might be affected by public spending cuts. Total compensation would be announced in the public spending review in October.
Equitable life pressure group EMAG were unhappy with the announcement but the Ombudsman said she would inform Parliament of her views once she had had time to consider the statement.
Although Equitable’s management initially welcomed the announcement, they were concerned that compensation would be based on Sir John’s report, written on the premise that only five of the Ombudsman’s findings of maladministration were valid. In opposition, Hoban had promised that all ten counts would be considered. Equitable's Chief executive, Chris Wiscarson wrote to Hoban saying that they could not support Chadwick’s recommendations which would only cover about 10% of losses. Compensation should be based on a total figure of £4.8B.
On 20 October 2010, the Chancellor of the Exchequer announced in his Spending Review Statement that the compensation package would be around £1.5billion.
Read more about this topic: The Equitable Life Assurance Society
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