The government has announced that investors who lost money with Equitable Life will start receiving compensation from next month. However, estate of deceased victims and older policy-holders subscribed to with-profit annuities will be given priority, the announcement said.
The total payouts will be about £1.5 billion. Of all the eligible investors, only annuitants will be paid in full. Remaining investors will receive only 25 percent of the amount lost.
The compensation amount has been formulated based on “the principles of fairness, transparency and simplicity”, claimed Mark Hoban, financial secretary to the Treasury.
All eligible policyholders will be contacted by June 2012, irrespective of whether they will receive a payment. Eligible investors with claims less than £10 will not receive any payment. The government will send out statements detailing amounts of payment and the expected date of payment.
Although the compensation will be tax-free, it could be taken into account while calculating other state benefits.
“Having spent a great deal of time in dialogue with interested parties, the Government is now approaching the final stages of preparation before the scheme begins to make payments to policyholders”, said Mr. Hoban.
“The Government’s ambition is for these payments to begin before the end of June”, he added.
Compensation from the scheme could be brought forward ‘regardless of circumstances’ on hardship grounds, the government clarified. Investors need not do anything now while NS&I – the savings arm of the government will administer the scheme.