The Equitable Life scandal has left thousands of victims fighting for their hard-earned compensation, with many still waiting after 25 years. But here's where it gets controversial: the government's compensation package falls short of the actual losses, and the Equitable Members Action Group (Emag) estimates that the Treasury will pocket more than 10% of the allocated money. This has left many feeling like they've been dealt another unfair blow.
The story begins with Susan Wood, a Sheffield resident who lost about £23,000 of her retirement savings when Equitable Life folded in 2000. She had trusted the company, which was seen as a gold standard financial institution, to look after her money. But when the company ran into financial trouble in the 1990s, it couldn't honor the 'with profit' annuities it had sold, and the rest is history.
The scandal unfolded when Equitable Life couldn't afford to pay the promised bonuses on these policies, leading to legal proceedings and a ruling that cost the company an estimated £1.5 billion. Despite attempts to restructure and sell the business, it eventually closed its doors to new business in 2000.
The Financial Services Authority, the City regulator at the time, was found guilty of maladministration by the parliamentary ombudsman, which criticized it for not acting more quickly to protect policyholders. The government, however, announced a £1.5 billion compensation package in 2010, which fell short of the actual losses.
The Equitable Members Action Group (Emag) has long campaigned for full compensation, estimating that more than 10% of the allocated money will be pocketed by the Treasury. Emag found that annual payments to with-profits annuity holders were about £54 million below forecasts in 2022-23, and that about 100,000 other policyholders couldn't be found to receive one-off payments, meaning £24 million less was spent than anticipated.
The government set up the Equitable Life Payment Scheme to manage claims, but victims say payouts have been a fraction of their actual losses, and in some cases, people due payouts couldn't be tracked down at all. The Treasury disputed these claims, but the story of the Equitable Life victims is a cautionary tale about the importance of financial regulation and the need for companies to act in the best interests of their customers.
