MPs call for Equitable Life policyholders to be paid £2.8bn owed by government

Hundreds of thousands of people's policies were hit when the mutual insurer almost collapsed at the turn of the century

(Getty)

MPs today called for Equitable Life policyholders to be paid the £2.8bn balance owed to them by the government.

A debate in the Commons led to all-party support of a motion calling on the government to ensure full compensation to victims during the lifetime of the next Parliament.

Hundreds of thousands of people's policies were hit when the mutual insurer almost collapsed at the turn of the century. It was brought to its knees by a misguided promise of guaranteed annuities, which it had no realistic chance of fulfilling. Attempts to resolve the problem by changing the terms of the guarantee was challenged in court culminating in 2000 with a House of Lords ruling that Equitable must honour the guarantee.

It could not afford to do so and was forced to close its doors to new business in 2001 while subsequent investigations revealed cases of mismanagement by Equitable.

Policyholders facing a decade-long battle to win compensation from the Government. In 2012 a compensation scheme began paying out, but only offered around a quarter of their losses.

Today MPs were unanimous in agreeing that the current £1.5bn payment scheme does not meet the Parliamentary Ombudsman’s recommendations.

Other points which came up in the debate were that the gross failure of bank regulation had cost the taxpayer tens of billions and left the government with nothing in the pot for pensioners.

EMAG spokesman Paul Weir said: "We call on George Osborne to listen to the will of MPs from across the house and commit the government to settle its debt to Equitable Life victims.

"The current government is playing roulette with up to 5 million votes if they don't do the right thing. Do they really want this hanging round their necks for another 5 years? We are not going away."