The Treasury has published the Independent Commission on Equitable Life’s report, outlining recommendations for the allocation of compensation amounting to £775 million.
Today’s report recommends a pro rata allocation of the available funds in proportion to the size of relative losses suffered, which equates to 22.4% of non With Profit Annuity policyholders’ relative losses. It recommends taking a single policyholder view wherever practicable, offsetting relative gains against relative losses for those that have more than one policy.
Further, the paper recommends putting in place a floor of around £10 beneath which payments should not be made. This aims to avoid the administrative costs of compensation outweighing the benefit of payments made.
Subject to practical constraints, the oldest policyholders will take priority for payment, followed by the estates of deceased policy holders and the estates of those who will die before receiving a payment in the next three years.
In a statement, the Treasury confirms that the Government accepts the principles recommended by the Commission, and will now look into how they can best be applied in practice.
Chair of the commission Brian Pomeroy said he was “very pleased” that the Government had accepted the recommendations.
“The Commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent, and fair for policyholders,” Pomeroy said.
Government will now publish a scheme design document setting out the practical implications of the recommendations, along with other important issues related to the delivery of the scheme such as the timetable for making payments, and the complaints and challenges procedure.
The document will be made available for parliamentary scrutiny in the spring, the Treasury said.
Financial Secretary to the Treasury Mark Hoban thanked the Commission, whose hard work had brought a resolution to the issue “one step closer”.
“We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure.
“The Government accepts the principles recommended by the Commission. It will now work out how best those principles can be applied in practice to policyholders, while allowing the Government to begin making payments as soon as possible,” Hoban said.