More than 200,000 people who lost money in the collapse of Equitable Life may miss out on compensation because of failings in the Government’s reimbursement scheme – which is administered by the outsourcing company Atos.
That is the conclusion of a report by the Public Accounts Committee (PAC), the Westminster spending watchdog.
After a decade-long battle by Equitable savers, the Treasury announced after the Coalition Government took office that it would compensate up to 1.5 million policyholders who lost money from the collapse. The Chancellor, George Osborne, capped total payments at £1.5bn.
But the Treasury now estimates that it may not be able to trace around 20 per cent of policyholders by the time the scheme winds up in March next year. The PAC accused the Treasury of adopting an “arbitrary” target to close the scheme.
It was also highly critical of the service provided by the scheme’s administrators Atos. The committee pointed that the outsourcing firm, which earlier this week was found to have made mistakes in nearly half its work assessments, was not being paid by its performance.
The report said that the £57m cost of running the scheme had already gone £4m over budget and was governed by a contract that gave Atos “no incentive … to act efficiently and speedily”. Claimants have complained of receiving duplicated and unnecessary correspondence, which was “frustrating to the claimant and wasteful to the taxpayer”, said the report.
The PAC said the Treasury set an arbitrary deadline of June 2011 for making the first payments, at the expense of planning properly for how the scheme would be administered.
It added that a “lack of good planning” led to “unacceptable delays” in payments, with only £168m paid out by March 2012, rather than the expected £500m. By the end of March this year, some £577m had been paid out to 407,000 policyholders, with a further 664,200 payments totalling £370m due to be made by the time the scheme winds up in March 2014.
The committee’s chairman, Margaret Hodge, said: “It is completely unacceptable that more than 10 years after the collapse of Equitable Life so many victims still have not received the compensation they are entitled to. Hundreds of thousands of conscientious savers are losing out because of the Treasury’s failure to get a grip on the payment scheme.”
However, a Treasury source said: “We do not agree that the Government has failed to get a grip on the planning or delivery of this important work. We continue to monitor the progress of the Equitable Life Payment Scheme very closely and are working hard to maximise the numbers of people who will eventually receive payments.”
Timeline: The crash
2000 Policyholders see the value of their investments fall when the Equitable Life Assurance Society (Elas) closes to new business.
2002 Income cut by 20 per cent to 50,000 annuity holders.
2008 The Parliamentary Ombudsman says regulatory failure was part of the reason for Elas’ failure.
2010 The Equitable Life (Payment) Act is passed, giving the Treasury powers to make voluntary payments to one million people.
March 2014 The deadline by which all Equitable policy holders must make claims.