The Government is set to miss its target of paying compensation to Equitable Life's former policyholders by the middle of the year.
An update on disbursements under the Equitable Life Payments Scheme, released at the weekend, showed that fewer than 10 per cent of 982,000 pension and bond investors eligible for payments have so far been contacted by the Treasury. Also, only around 30 per cent of 37,000 eligible "with profit" annuities investors have so far received a payment.
The payout scheme started last June. By November less than £1m of payments, out of a total allocated pot of £1.5bn, had been made, with just 3,000 former policyholders receiving payments. The Treasury argues that the latest figures show that decent progress is finally being made.
But according to the Equitable Members' Action Group (EMAG), which campaigns on behalf of policymakers, the Government is still not moving fast enough. The EMAG says that to hit the June 2012 target of compensating pension and bond policyholders, the Treasury would need to raise its despatch rate of letters from 10,000 per week, to around 40,000 per week.
Equitable Life was one of the biggest mutually owned life insurers in the world, with around 1.5 million policyholders. The company failed in 2000 after making promises to some policyholders that it could not afford to keep.
In 2008 Parliamentary Ombudsman, Ann Abraham, said regulators had failed to protect investors. She found 10 examples of maladministration and called for the government to establish a compensation scheme, an idea it had rejected since 2000. She decided that the authorities had let the society continue trading "on an unsound basis" since 1990, allowing the public to be misled into thinking the society was solvent when it was not.
In October 2010, the Chancellor, George Osborne, announced that the Government would pay compensation. According to the Treasury, the "vast majority" of policyholders will receive compensation by this summer.Reuse content