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Equitable Life victims will get Government compensation

14 January 2009 / by Rachel Mason
Victims of the Equitable Life scandal are finally to receive Government compensation, nine years after the insurance firm failed.

According to a report in the Telegraph today, the Treasury has admitted regulatory failures were partly to blame for the insurance firm's demise, and therefore, that compensation must be paid.

More than a million people lost their life savings when Equitable Life – the world's oldest insurer – collapsed in 2000.

In July 2008, Ann Abraham, the Parliamentary Ombudsman, released a report which analysed the Government bodies overseeing Equitable Life's practices, and not the firm itself, to discover whether or not official regulatory bodies had failed to do their job.

She said she found evidence of "serial regularity failure", identifying 10 instances of maladministration by the Department of Trade and Industry, the Government Actuary's Department, and the Financial Services Authority, and called on the Government to apologise to policyholders and set up a fund to compensate them for the 'injustice" they had suffered.

In December, another report was released, this time from the Public Administration Select Committee, which echoed the requests of the July report and urged the Government to "accept the Ombudsman’s findings of maladministration" without further delay.

At the time, the Government was criticised for putting off making a response, with Liberal Democrat Shadow Chancellor Vince Cable saying "The Government should apologise for the years of delay, anxiety and unanswered questions suffered by policyholders.

"Ministers have not only completely failed to regulate properly, but have proven themselves utterly incapable of establishing a proper investigation into this affair."

Now the victims of Equitable Life's downfall will finally receive the compensation they are due.

Yvette Cooper, the Chief Secretary to the Treasury is expected to tell MPs tomorrow that the Government will set up an 'independent tribunal' to work out how much compensation should be paid to the victims.

It is also understood that ministers may make a formal apology for their failings over regulating Equitable Life.

Equitable Life was founded in 1762 and for many years enjoyed impressive returns, becoming 'the pension provider' for the middle classes.

But, in the 1990s, Equitable Life was paying competitive bonuses to its customers but failing to put any money aside for the future; regulators failed to intervene and the firm's model collapsed in 2000.

Around a million people saw their pension values cut and many of them have been campaigning ever since for official compensation from the Government.

© Fair Investment Company Ltd