MPs blast Treasury over Equitable Life saga
MPs have heavily criticised the Treasury over its handling of compensation payments to victims of the Equitable Life collapse.
The Public Accounts Committee (PAC), chaired by Labour MP Margaret Hodge, said the way in which the Treasury had handled compensation was "unacceptable".
The PAC warned that 20% of Equitable Life policyholders – between 200,000 and 236,000 people - might never receive any compensation money at all, mainly because the Treasury has said it may be unable to trace them.
Equitable Life collapsed in 2000, leaving 1.5 million policyholders in the lurch. In October 2010, the government agreed to a £1.5 billion compensation pot, but the PAC says the money is not being distributed as well as it could.
By March 2012 just £168 million had been paid out to policyholders. The PAC believes £500 million should have been distributed by then.
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. It focused on an arbitrary target for making the first payments at the expense of proper planning and this has led to unacceptable delays and spiralling costs.
"Only 35% of policyholders have received payments despite 72% of the budget being spent."
The compensation scheme is set to close in March 2014, with the Treasury still to make 664,200 payments worth £370 million.
"Unless the Treasury and its administrator, National Savings & Investments, get their act together there is a real risk that large numbers of policyholders will miss out," Hodge added.
The PAC suggested the Treasury should bring forward a publicity campaign it is due to launch in September.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).