Equitable Life Policyholders: Compensation

Peter Swallow Excerpts

Thursday 22nd October 2026 Westminster Hall

[Peter Swallow (Bracknell) (Lab)]

As my hon. Friend the Member for Glasgow North (Martin Rhodes) pointed out, there are many issues connected with this scandal that have affected people’s trust in pensions. The Minister will know that I have also been a very vocal champion of those affected by the lack of indexation for pre-1997 pensions.

Does my hon. Friend the Member for Leeds North East (Fabian Hamilton) share my concern that the fundamental risk is that individuals will choose not to invest in pensions, having lost faith that, if something goes wrong, it will be put right? Ultimately, that will cost the taxpayer more, as people will not make the sound choice we want them to make of saving for their retirement.

[Fabian Hamilton]

My hon. Friend is absolutely right, and I certainly agree that at the heart of this matter is the issue of trust. As people throughout society lose trust in the institutions of government and the state, we will find increasing chaos and instability. Stability comes from trusting the institutions to deliver, and that trust is a two-way process. I thank him for his intervention.

The principle matters, not just to Equitable Life policyholders but, as we have just been saying, to wider public confidence in Government and the regulatory institutions upon which we all rely, as we have heard.

Aside from looking at full redress, I urge the Government to consider another issue. EMAG has calculated that, as of 31 May 2025, approximately £171 million of money already allocated for compensation had been held back by the Treasury rather than being paid to policyholders. This is not new money; it is money that had already been allocated. This situation deserves serious attention. It must surely be right that at least the value of all the money actually allocated for compensation as far back as 2010—16 years ago—should reach those affected.

It is important to understand the figures and what policyholders fear is the Treasury’s plan. Of the £1.5 billion allocated in 2010, £625 million was assigned to compensate with-profits annuitants; £100 million was retained as a contingency against the possibility that those annuitants would live longer than expected; and £775 million was allocated to the remaining eligible policyholders. Importantly, the £625 million allocated to annuitants was a discounted figure, reflecting the value at the time of future payments. The forecast cash cost of those annual payments was £836 million through to 2050, which is still a long way ahead of us. The forecast total cash spend of the compensation scheme as a whole was £1.7 billion—I hope everybody is following these figures.

According to the figures compiled by EMAG, actual payments to with-profits annuitants were around £599 million by 30 May 2025—just over a year ago—compared with forecast expenditure of approximately £646 million. That represents a difference of £47 million. And of the £775 million allocated to other policyholders, approximately £751 million had been paid out, leaving £24 million unspent. Together with the £100 million contingency, which EMAG argues is no longer required for its stated purpose, the total underspend as of May 2025 was said to be approximately £171 million. I will make sure the Minister gets those figures later; of course, they will all be in Hansard.

I recognise that the Minister may wish to examine or even dispute those figures and the assumptions behind them, but I think we can agree that it is in everybody’s interests that there is absolute clarity around this. I hope that the Government will provide that clarity. If funds have been allocated but are not needed to meet the liabilities for which they are intended, they should be used to compensate people who have still not received their full redress. Those people are already known and their losses have been calculated. There is therefore a strong case that additional payments could be administered without much cost and complexity. Releasing those funds would not address the issue of the full outstanding debt still owed, but it would be a positive step forward in this long-running saga.

There is a group of people whose position deserves particular attention and for whom an underspend could be used: around 10,000 with-profits annuitants were excluded from the compensation scheme because they bought their annuities before September 1992. When the Equitable Life (Payments) Bill came before Parliament in 2010 and 2011, I tabled an amendment to bring those 10,000 pre-1992 with-profits annuitants into the scheme, but it was sadly lost.

The argument for excluding those annuitants was that they could not have known about the true parlous state of Equitable Life at the time, but that does not take away the financial losses that they too suffered. They were affected by the same underlying regulatory maladministration and the near collapse of the society. They have seen their annuity payments drastically reduced just as other annuitants have. The ombudsman’s findings and recommendations did not distinguish between those who had taken out annuities before and after September 1992; that distinction was a construct of the Treasury, not the ombudsman or the society.

Those annuitants are, of course, among the oldest and most vulnerable victims of the scandal. Many will now be at a very advanced age, and many more have sadly died already. Every year that passes reduces the opportunity for them to receive the redress that they have long sought. Justice delayed is justice denied, but it has a particularly cruel consequence when the people waiting for it may not even live to see it delivered.

The Government should therefore examine how the underspend could be used to bring those annuitants into the scheme. EMAG has suggested that payments could be distributed in proportion to their current annual annuity payments, avoiding the need for individual actuarial calculations. The ex gratia payments made to them in 2013 following representations by MPs, including me, and EMAG could be offset against any additional payments, because they will be recorded. I urge the Minister to look closely at what can be done for the surviving pre-1992 annuitants—there are not that many of them.

An important core principle is at stake here. The Government, on behalf of the Crown in Parliament, have accepted the ombudsman’s findings and acknowledged £4.1 billion in losses attributable to maladministration. They have also calculated the specific losses suffered by individual policyholders. When the state accepts responsibility for a mistake and identifies the financial harm caused, it should be prepared to provide proper redress. The Government should not be exempt from the principles of accountability and fairness they expect others to observe.

Fuller compensation would also recognise the importance of the Parliamentary and Health Service Ombudsman to our unwritten constitutional system. Independent investigations and formal findings of maladministration must surely mean something. If those findings are accepted but the recommended redress is not delivered, public confidence in the system risks being further weakened, as has already been said.

I would also suggest that further compensation would not be money spent to no positive effect—quite the opposite, in fact. Additional compensation would help people to meet the costs of care and everyday living, support their families and contribute to local businesses and communities, and I have absolutely no doubt that a significant part would return to the Exchequer through taxation, so it is not all losses. More importantly, it would give people back some of the financial security that was taken from them through failures for which the Government have accepted responsibility. I will conclude by asking the Minister to address four specific questions. I apologise for the lengthy nature of my introductory remarks, but those points had to be made.

First, does the Minister believe that, in cases where the state has accepted responsibility for a failure leading to financial loss for individuals, and that loss has been calculated by it, the default position should be to provide full redress?

Secondly, can the Minister confirm that total cash expenditure on with-profit annuitants was forecast to be £836 million, that that figure was discounted to arrive at the £625 million allocation for those annuitants, and that actual payments to date are below forecast?

Thirdly, I will be grateful if the Government will confirm whether the £100 million contingency fund remains necessary to cover the risk that with-profits annuitants live longer than expected. If that contingency is no longer required for its stated purpose, will the Minister commit to considering its use for further compensation?

Finally, will the Minister agree to carefully examine the possibility of including the surviving pre-September 1992 annuitants who were excluded from the compensation scheme? The victims of this scandal have waited long enough. That is why there are so many colleagues in the room today. The victims did not create the regulatory failures that damaged their retirement savings. They followed the advice to save responsibly, trusted the system established by Parliament and were let down by the institutions charged with protecting them.

The Government have acknowledged the wrongdoing and losses and established a compensation scheme, but that scheme left the overwhelming majority of affected policyholders with only a small proportion of what they lost. Clearly, we cannot undo what has happened, but we can decide whether to leave this long-standing injustice unresolved or to take practical steps towards putting it properly right.

The Government should review the unspent compensation funds, reconsider the exclusion of the pre-1992 annuitants and set out a path towards full and fair redress. Those who lost their savings deserve more than just our sympathy. They deserve fairness and justice now through action by the Government, not more empty words.