Equitable Life payout finally agreed. But you won't get it for five years.
The irony of the 'Equitable' fiasco will not go unnoticed by the poor sods who lost a fair fortune with the near-collapse of the insurance company back in 2000. In simple terms, the company offered Guaranteed Annuity Rate (GAR) policies which guaranteed a minimum rate of return on their investments once they got to retirement, except it looked like Equitable Life had never really thought anyone would actually hold the company to it, as it had not put enough money aside to do so. The start of the decline came in the 90s when it seemed they might actually have to do what they said after all. Shock horror. Still, at least this massive and public display of mismanagement, gambling with other people's money and general slapdash attitude prevented another, more dramatic financial crisis seven years later. Oh, wait...
Although much of the catastrophe could be lain squarely at the door of mismanagement by the insurance bosses, an Ombudsman report in 2008 decided that the Governmental authorities had not done their job at all properly and had let the society continue trading "on an unsound basis" since 1990, thereby letting the public be misled into thinking the society was solvent when it was clearly not.
All along the government has denied that it, and by extension the taxpayer, had any responsibility for the investment and managerial shortcomings of a commercial insurer, but it has now finally caved in to pressure and announced a compensation deal for the Equitable investors. Which is great news for the 1 million or so policyholders, not so great news for the other 59 million of us here in the UK.
Mark Hoban, the financial secretary to the Treasury, said the new payment scheme would "reflect the principles of fairness, transparency and simplicity", adding "when payments start in the middle of this year, it will be a huge milestone for the policyholders who have waited so many years for the resolution of this matter." However, payments will be spread over five years.
Paul Braithwaite, the general secretary of the Equitable Members Action Group, was not a happy bunny, and warned that many more annuitants will die before they receive the compensation they are due.
The Government has admitted that policyholders suffered "relative losses" of £4.1bn, but decided it could not afford to repay that amount. Only annuity holders will be compensated in full; payments to other investors will amount to less than a quarter of the amount they lost. £775m will be paid out to about 945,000 policyholders, while £620m will be shared among 37,000 with-profits annuitants. Don't worry though, all compensation will be tax-free.