Simon Read: Equitable Life victims have every right to be angry

Victims of the Equitable Life fiasco were given the old "good news, bad news" routine by the Government on Thursday. Treasury minister Mark Hoban, said a compensation scheme for people who lost cash in Equitable's with-profits scheme is finally being set. That's the good news.

The bad news? Compensation could be as low as £400m. That might sound a lot but members of the Equitable Members Action Group have been pressing for a £4bn to £5bn payout. The proposed payout could be as little as a tenth of what the victims think they deserve. In fact, the group estimates that the losses incurred by policyholders total £4.7bn.

Why is the compensation likely to be so much less? The lower figure was suggested by Mr Hoban following the publication of an independent report published on Thursday by retired judge Sir John Chadwick. He was commissioned by the last government to examine which policyholders had been hit hardest and what proportion of their losses could be attributed to maladministration.

Let's remind ourselves of what happened to Equitable: the company failed in 2000 because it did not have the funds to pay out the big bonuses and sky-high guaranteed annuity rates it promised its customers. It made the promises to attract investors but they were clearly made on sand and water. It seems to me that anyone duped into investing by these false promises should get compensation as soon as possible.

Sir John estimated that the "relative loss" of policyholders is between £4bn and £4.8bn. That's the difference between what they got from Equitable, and what they would have received if they had invested their cash with a rival.

But his report suggested victims should only receive a payout of between £400m and £500m. Why? Because Sir John speculated that most of the policyholders would have invested in Equitable irrespective of whether there had been any maladministration. Would they? I've no idea, but I think that's irrelevant to their compensation claims. It seems simple to me: if they are to be paid compensation, it should cover their losses.

Precise details of how much will be paid out is due to be revealed in October and the Government says it aims to begin making payments to policyholders in the middle of 2011. The delay adds further injury to Equitable Life victims. The action group points out that an average of around 15 Equitable investors have died every day while waiting for a decision. The previous government dragged its heels over the issue, meaning that in the decade since Equitable's collapse, some 50,000 policyholders have died. The Conservatives promised they would deal with the situation when they got into power but, as usual with politicians, they are dragging their heels and hiding behind red-tape and excuses not to get things sorted quickly.

Mr Hoban, for instance, said that the Chadwick report was "just one of the building blocks in resolving what is a complex matter". Building blocks? What is he on about? He went on to add that there are other judgments to be made in deciding the final shape of the compensation scheme.

That nonsense is unfair to the victims. They have waited almost a decade for justice and the new Government should stick to its promises and act quickly to put an end to the whole affair.

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s.read@independent.co.uk