UK Government Should Compensate for Equitable Life Losses

Article published on 2nd August 2008

Last Thursday the UK's Parliamentary watchdog stated that the government should compensate more than 1m people who lost their savings in the collapse of the Equitable Life Assurance Society (Britain's oldest mutually owned insurance company) eight years ago.

Equitable Life came to the brink of collapse at the turn of the Millennium because of over a billion pounds in liabilities that it had amassed due to the selling of pension policies guaranteeing annuity payments of up to 11.5 %.

These promises turned out to be far too expensive for Equitable Life to pay out on, and so the insurer was compelled to close to all new business and cut the value of its members' policies. The net result was that over one million British policy holders and more than fifteen thousand in other EU countries incurred major losses to their pensions, savings and/or investments.

In her 2,800 page report, Parliamentary Ombudsman, Ms. Ann Abraham, said the government needed to apologise for its "serial regulatory failure" of Equitable Life and that officials should organise a compensation plan to renumerate policyholders who became out of pocket due of the company's many problems.

The report, which takes the form of a recommendation to government, did not stipulate precisely how many policyholders are eligible for the suggested compensation, or how much they might receive. The report also did make any guesses about how much such a compensation package would cost the government.


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