The government has apologised to Equitable Life victims and promised compensation for some policyholders.
In a statement read out in the Commons, Treasury minister Yvette Cooper admitted maladministration and said government action was merited.
She also pledged compensation for some of the “disproportionately affected” policyholders. More than one million people lost up to half their savings as a result of the insurer collapsing in 2000.
Equitable Life got into trouble after it promised guaranteed pension income to customers based on interest rates in the 1970s and 1980s. However, during the 1990s when interest rates fell and inflation rose, the insurer found it was unable to honour policies, leaving more than a million customers high and dry.
It finally collapsed in 2000, and has been subject to several investigations ever since. In 2004, Lord Penrose concluded his review and blamed the management for the disaster. However, as the firm went bust, no compensation has ever been paid out.
The latest government move to compensate some policyholders is bittersweet; it is still unclear exactly how many people will benefit from recompense, how much they will receive or how long before payments are made.
In addition, it is estimated that more than 30,000 affected Equitable Life policyholders have died since the company collapsed, and 15 more pass away every day.
Former judge, Sir John Chadwick, is to head-up an independent tribunal to determine compensation for each policyholder.
But Tom McPhail, head of pensions research at Hargreaves Lansdown, warns this is just the first step in what has the potential to be a “complicated and lengthy” compensation process.
“Equitable investors shouldn’t be surprised if the eventual compensation for which they have campaigned so long and so hard, actually turns out to be no more than a few shillings and a piece of mouldy string,” McPhail adds.