Equitable Life policyholders came a step closer to finally receiving compensation today, as the Treasury laid out its plans for its £1.5bn Payments Scheme.
Mark Hoban, financial secretary to the Treasury, promised this month the government would begin paying out to Equitable victims by the end of June.
Today the government has set out the formula it will use to calculate compensation levels for different Equitable investors, including group pension scheme, with-profits and with-profits annuity policyholders.
During the 2010 spending review, George Osborne said the government would set aside £1.5bn for compensation for Equitable Life victims.
"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," said Hoban.
The Treasury said policyholders do not need to do anything yet and the scheme will contact them with more information.
How the scheme works
Compensation is based on the relative loss policyholders experienced by having a product from Equitable Life, calculated by comparing their policy with the average performance of a sample of Equitable's competitors.
Equitable Life policyholders can expect a letter from the scheme before June 2012 about their payment.
Accumulating with-profits policies
For accumulating or unitised with-profits (AWP) policyholders, relative losses or gains are calculated on payments into and out of the policy between 1 September 1992 and 31 December 2000.
Only policies set up between these two dates, or those that had premiums paid into the with profits fund between January 1993 and December 2000, are eligible for compensation.
Group scheme policies
Group scheme policies have the same structure as AWPs and so the calculation of relative losses will be the same.
However, there are varying levels of data available for these products. Where data on individual members' policies exists, losses and contribution will be calculated on an individual level, and if not, on a group level.
Conventional with-profits policies
Conventional with-profits policies are split into two groups: those terminated on or before December 2009, and those still in force after that date.
For those ended before December 2009, the loss is calculated by comparing the payout the member received on terminating the policy and the payout of an average competitor to Equitable Life.
For those still in force after December 2009, the payout is based on comparing the Equitable Life policy value to the average value of a sample of Equitable Life competitors.
Only policies started and paid into between September 1992 and December 2000, and had not been claimed on before December 1992 are eligible for compensation.
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created