Commission report divvies up Eq Life compensation

The government has published the Independent Commission on Equitable Life Payments’ report, which recommends how compensation worth £775m should be divided up.

The commission recommends a pro rata allocation of the available funds, in proportion to the size of relative losses suffered, equating to 22.4% of non with profit annuity policyholders' relative losses.

It also says there should be a minimum amount, of around £10, beneath which payments should not be made.

This is because administering very small payments below this sum would be disproportionate to the administrative costs of making them while being of negligible significance to recipients.

The commission recommends taking a single policyholder view, wherever practicable, offsetting relative gains against relative losses for those who have more than one policy

Additionally, the commission recommends the oldest policyholders and the estates of deceased policyholders should be prioritised in the order of payment.

The government says it has accepted the principles recommended by the commission, and will work out how best those can be applied in practice.

It says it will publish a scheme design document setting out the practical implications of the recommendations along with other important issues related to the delivery of the scheme in the spring.

Financial Secretary to the Treasury Mark Hoban (pictured) says: "We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure.

"I am grateful for the work the Commission has done to establish policyholders' concerns and have used this to recommend the principles of the payment scheme. I welcome their recommendations and we will now use them as the basis for making payments to policyholders."

Commission chairman Brian Pomeroy says: "I am very pleased the government has accepted all our recommended principles.

"The Commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent, and fair for policyholders."

In October 2010's Comprehensive Spending Review, George Osborne allocated £1.5bn to compensation for Equitable Life victims.

The sum announced today represents part of that compensation, with £1bn to be allocated within the first three years of the Payments Scheme.

Under the Commission's plans, it says almost 70% of 11,250 known eligible estates could receive payment in the first year.

Almost all eligible policyholders over the age of 75 and all eligible policyholders over the age of 60 with individual policies could receive their payment in the first year of the Payments Scheme.

Paul Braithwaite, general secretary of the Equitable Members Action Group, says the report is 'predictable'.