Independent Commission on Equitable Life Payments (Report)

Mark Hoban Excerpts

Wednesday 26th January 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

On 22 July 2010, I announced that the Government would establish the Independent Commission on Equitable Life Payments. This was in line with the Government’s pledge to

“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure”.

Following the spending review, the Commission was asked to carry out two tasks. The first was to advise on the fair allocation of funds totalling £775 million among all policyholders, with the exception of with-profits annuitants (WPAs) and their estates. We had already announced that there should be no means-testing and that the estates of deceased policyholders should receive payments. The second was to advise on any groups or classes of policyholders that should be paid as a priority with regard to the timing of payments, again with the exception of WPAs and their estates.

The Commission has met with various interested parties, including the Equitable Members Action Group and Equitable Life, as well as receiving representations from a wide range of individual policyholders.

I would like to thank Brian Pomeroy, John Howard and John Tattersall for all their hard work on this issue. They have taken the time and care to find out policyholders’ concerns and have used this knowledge to help form their very useful advice. The work that the Commission has carried out helps bring us a step closer to resolving this issue.

Today, I am publishing the Commission’s advice and depositing a copy in the Library of the House. The Commission has recommended the following for the allocation of funds:

a pro rata allocation of the available funds, in proportion to the size of relative losses suffered. This equates to 22.4% of each policyholder’s relative losses;

a single policyholder view, wherever practicable, offsetting relative gains against relative losses where policyholders have multiple policies; and

a de minimis amount, in the region of £10, beneath which payments should not be made. This reflects the Commission’s view that administering very small payments below this sum would be disproportionate to the administrative costs of making them while being of negligible significance to recipients.

The Commission recommends that the following groups be prioritised for payment, subject to the practical constraints laid out in the Commission’s advice:

the oldest policyholders, as they are least able to wait for payment and are also least likely to be in a position to mitigate the effects of a delay; and

the estates of deceased policyholders and, as far as possible, the estates of those who die, before receiving a payment, in the next three years.

The Government accept the principles recommended by the Commission. Our task now is to work out how best those principles can be applied in practice to groups of policyholders while allowing us to begin making payments as soon as possible.

The Government will publish a detailed scheme design document that includes the practical application and delivery implications of the Commission’s recommendations. I will make this available for parliamentary scrutiny in the spring.