MPs slam compensation scheme delays

Updated: 
Equitable life brochureMore than 200,000 victims of the collapse of Equitable Life may miss out on compensation payments because of failings in a Government scheme, a scathing report by a Westminster spending watchdog warned today.

The House of Commons Public Accounts Committee accused the Treasury of adopting an "arbitrary" target of March 2014 to close the compensation scheme, and urged it to take urgent action to track down as many former policyholders of the failed insurer as possible before the deadline passes.


After a decade-long battle by Equitable savers, the Treasury announced shortly after the coalition Government took office in 2010 that it would compensate up to 1.5 million policyholders. Chancellor George Osborne capped total payments at £1.5 billion in his spending review later that year.

But today's report found that the Government "failed to learn the lessons" from previous schemes, such as those for former miners and Icelandic trawlermen.

The Treasury focused on an arbitrary deadline of June 2011 for making the first payments, at the expense of planning properly for how the scheme would be administered, said the report. A "lack of good planning" led to "unacceptable delays" in payments, with only £168 million paid out by March 2012, rather than the expected £500 million.

By the end of March this year, some £577 million had been paid out to 407,000 policyholders, with a further 664,200 payments totalling £370 million due to be made by the time the scheme winds up in March 2014.

But the Treasury estimates that it may not be able to trace some 17%-20% of policyholders - between 200,000 and 236,000 people eligible for payments - by that date. And ministers are not planning to publicise the closure of the scheme until September, which provides little time for applications to be submitted by these savers, many of whom are elderly.

Urging ministers, and the Government agency National Savings & Investment (NS&I) which operates the scheme, to bring forward the publicity campaign, the cross-party committee said it was "concerned" that some policyholders will miss out.

Committee chairwoman Margaret Hodge said she was "stunned" to learn that the Treasury destroyed details and addresses of 353,000 policyholders provided by the Equitable Members Action Group in 2011 on data protection grounds. It was now "imperative" that the Treasury and NS&I should work with EMAG to explore ways in which the maximum number are contacted before the deadline passes.

The report also called on NS&I to "improve its control" over the £57 million cost of running the scheme, which was initially outsourced to Siemens before being taken over by Atos. NS&I estimates it has already gone £4 million over budget, and today's report said that the structure of the contract gave Atos "no incentive... to act efficiently and speedily".

Claimants have complained of receiving duplicated and unnecessary correspondence, which was "frustrating to the claimant and wasteful to the taxpayer," said the report. Meanwhile, the report was critical of incorrect data provided by scheme actuary Towers Watson to some policyholders who asked how their payments were calculated.

Mrs Hodge said: "It is completely unacceptable that more than 10 years after the collapse of Equitable Life so many victims still have not received the compensation they are entitled to.

"Hundreds of thousands of conscientious savers are losing out because of the Treasury's failure to get a grip on the payment scheme. It focused on an arbitrary target for making the first payments at the expense of proper planning and this has led to unacceptable delays and spiralling costs.

"Only 35% of policyholders have received payments despite 72% of the budget being spent. Twenty per cent of policyholders - between 200,000 and 236,000 people - might never receive any money at all because the Treasury believes it may be unable to trace them.

"With less than a year to go before the scheme closes in March 2014, the Treasury still has 664,200 payments worth £370 million left to make. Unless the Treasury and its administrator, NS&I, get their act together there is a real risk that large numbers of policyholders will miss out."

She added: "It is extraordinary that the Treasury does not intend to start publicizing the closure of the scheme until September. It must do so now. The service provided to policyholders has also been unacceptably poor. Many have not received the information to understand how their payments have been calculated.

"We heard of cases where people had been sent multiple letters requesting the same information and received only generic responses to individual queries and complaints. NS&I must take action to improve the customer service provided by the contractor, Atos, and report to the Treasury on its performance.

"It is disappointing that many of these problems could have been avoided if the Treasury had only learned the lessons from the failure of previous government compensation schemes, such as those for former miners and Icelandic trawlermen. It must now undertake a proper lessons-learned exercise to ensure the same mistakes are not made in future."

A Treasury source said: "While Labour did absolutely nothing about the Equitable Life scandal for a decade, this Government has allocated up to £1.5 billion to help people who suffered a great injustice, with tens of thousands of policy holders receiving around £700 million in payments since 2011. We make no apology for starting to get payments out the door a year after the Coalition was formed.

"We do not agree that the Government has failed to get a grip on the planning or delivery of this important work. We continue to monitor the progress of the Equitable Life Payment Scheme very closely and are working hard to maximise the numbers of people who will eventually receive payments.

"Instead of scaremongering, the Labour chairman of this committee should explain why her party shamefully did absolutely nothing about this scandal for a decade."