An end is in sight for
long-suffering policyholders of Equitable Life Assurance Society
(ELAS), who suffered losses following the near collapse of the UK
mutual insurer nine years ago.
A compensation payment totalling
£1.5bn ($2.4bn) is to be shared by some aggrieved policyholders
with payments starting in 2011. Chancellor of the Exchequer George
Osborne announced the news on 15 October, during a speech in which
he revealed planned drastic cuts in government spending.
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The chancellor said £1bn would be
allocated to the compensation scheme in the first three years. Of
the £1bn, with-profit annuitants will receive £120m, with a further
estimated £500m to be paid to them after the initial three years
for as long as they live.
According to activist organisation
the Equitable Members Action Group (EMAG), there are about 37,000
with-profits annuitants with their share of the total payment
representing full compensation for their losses.
The compensation payment is far
higher than the envisaged total of between £400m and £500m,
announced by financial secretary to the Treasury Mark Hoban, in
July 2010. Hoban’s announcement was based on recommendations made
by former Appeal Court judge John Chadwick in a report undertaken
by him at the government’s request.
In reaction to Hoban’s
announcement, Conservative MP Bernard Jenkin announced in
early-October that the Public Administration Select Committee, of
which he is chairman, would hold an inquiry into the government’s
compensation plan, which he said was inadequate.
There has been no announcement by
Jenkin that the inquiry will be cancelled in the wake of the
government’s £1.5bn compensation plan.
Actuarial advisers to Chadwick’s
review, Towers Watson, indicated that 1.5m policyholders had lost a
total of between £4bn and £4.8bn. EMAG believes that total losses
amount to £5bn.
Prior to Chadwick’s report,
Parliamentary Ombudsman Ann Abraham published her findings in which
she stated that ELAS’ near-collapse in 2001 had been preceded by “a
decade of regulatory failure.” Abraham recommended that
compensation totalling £4bn should be paid to aggrieved
policyholders.
EMAG remains dissatisfied with the
government’s compensation. Of the remaining aggrieved policyholders
to be compensated under the government’s plan, EMAG believes that
about 600,000 will receive less than a quarter of their estimated
losses.
EMAG general secretary Paul Braithwaite told the BBC that what
EMAG believed to be inadequate compensation could prompt a legal
challenge from campaigners.
