The Government will only compensate Equitable Life policyholders who were 'disproportionately affected' by the maladministation of the scheme but victims may not see their money for well over two and a half years.
Speaking in parliament today, Treasury minister Yvette Cooper apologised to Equitable Life's customers on behalf of public bodies and Governments that failed to prevent the mutual from collapsing.
Cooper says the Government has finally agreed to give payouts to some of the million-plus investors who lost up to half their savings when the firm was brought to its knees in 2000.
However, policyholders will not necessarily receive 100% compensation, and the Government has warned it may take some time for those who lost out to reclaim their money.
In a ministerial statement today, the chief secretary to the Treasury announced a compensation scheme for policyholders but said this would only apply to those who lost out disproportionately over the Government's maladministration of the firm.
Cooper says it will take a policyholder's income compared to the amount they lost into account when deciding the extent to which a customer has been 'disproportionately affected.'
An independent tribunal to determine the level of compensation for each policyholder will be led by former judge Sir John Chadwick.
Parliamentary Ombudsman Anne Abrahams recommended it should take up to two and a half years to provide full compensation to those who lost out. However, Cooper today warned that payouts could take 'significantly longer' than this.
Campaigners say policyholders are dying at a rate of 15 per day, and are likely to criticise further delays in paying compensation.
The Equitable Members Action Group (EMAG) has demanded £4.5bn in compensation, covering loss of capital and interest payments for the policyholders, but analysts argue it will be very difficult to allocate payments.
Simon Morris, of City law firm CMS Cameron McKenna, says: "The Minister apologises and admits maladministration. But policyholders are likely to be sadly disappointed with any prospect of compensation years away and with many hurdles to be crossed."IFAonline
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