Thousands of policyholders who lost money when Equitable Life near-collapsed nine years ago could be denied pay outs because they are too well-off.
Nine years ago, policyholders at equitable Life saw the value of their savings
and private pensions
slashed by £4billlion.
Six months after the Parliamentary Ombudsman's report revealed that poor regulation was partly to blame for Equitable Life's failure; the Government has finally admitted that policyholders were victims of maladministration and should be compensated for their losses.
Speaking to MPs yesterday, Yvette Cooper, the Chief Secretary to the Treasury, said "We agree with the Ombudsman that there was maladministration by public bodies in several areas.
"In particular, the Government agrees that Equitable Life’s regulatory returns in the period from 1990 through to 1996 in some cases raised questions which should have been resolved by the public bodies, but were not.
"I wish to apologise to policy holders on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001, for the maladministration we believe has taken place."
Ms Cooper then went onto say that it was "not generally appropriate for the taxpayer to pay compensation even where there is regulatory failure" but said that due to the fact that some policyholders "have been disproportionately affected by the events at Equitable," that "it is right in this case for Government to set up an ex-gratia payment scheme to help."
She said that the Government's pay out scheme would "focus on those who have been hardest hit," and went on to say that there would be means testing to decide who would and wouldn’t get compensation, despite the fact that the Ombudsman called on compensation for all who had lost out.
She said that the Government would introduce a "fair payment scheme for policyholders who have suffered a disproportionate impact.
"We do not believe it would be right to set up a compensation scheme in the way the Ombudsman proposed but we do believe this is the right response," she said.
"I hope the House will recognise that there is no easy solution to the problems of Equitable and the faults that were found."
The Government's decision will come as a massive disappointment to thousands of policyholders who have been in affect labelled "too wealthy" for compensation.
Paul Braithwaite, general secretary of the Equitable Members Action Group (EMAG)
told the Telegraph "100 per cent failure should demand 100 per cent compensation to policyholders – not a discretionary hand out."
He said that EMAG is "appalled" that after avoiding the issue for more than eight years the Government still hasn't delivered, calling the response a "cynical manoeuvre" that will ensure many more pensioners die without getting fair compensation.
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