Victims of one of Britain’s biggest financial scandals are set to receive hundreds of millions of pounds in a one-off payment.
Customers of Equitable Life, which nearly collapsed in 2000, will be told this week about the plan by letter.
The sum they will receive is expected to be several thousand pounds each, it is understood.
Long wait: Nearly a million Equitable Life customers lost money in the 1980s and 1990s. Some saw their life-savings vanish and several have died without ever receiving compensation
It comes after the company built up surplus cash over the past 18 years.
Policyholders lost huge amounts from their pensions and savings when Equitable, the world’s oldest insurer, teetered on the brink.
Victims spent years campaigning for justice, with some dying before they ever got a penny back.
But it is understood Equitable is now poised to release the surplus cash to 300,000 policyholders whose policies are worth about £15,000 on average.
It will not meet compensation claims in full, however.
Last night a spokesman for Equitable Life said: ‘We are determined to distribute greater amounts of capital to policyholders, and we are hopeful of being able to give them some good news in the spring.’
HOW IT NEARLY TOPPLED
Founded in 1762, Equitable Life is the oldest mutual life insurance company in the UK.
It came to the brink of collapse in 2000 after it could not afford to pay guarantees on pensions annuities, and was forced to put itself up for sale and close to new business.
Equitable slashed the retirement income of around 1m pension savers. It also trapped investors in poorly performing ‘with profits’ funds by imposing hefty Market Value Reductions – or exit penalties – if they wanted to cash in early.
After several critical reports which found mis-management at the firm, the Government announced a £1.5billion compensation package.
The plan has been put forward under chief executive Chris Wiscarson, who has led Equitable’s recovery for the past nine years. And it has emerged bosses are exploring a possible sale of the business, with Goldman Sachs appointed to look for buyers.
However, legal hurdles would need to be cleared. This is because of rules which say with-profit funds can only merge if their policyholders would not end up worse off. In its heyday, Equitable had 1.5m policyholders worth £26billion.
But a million people lost up to half their life savings when the firm, which dates back to 1762, came close to collapse in 2000.
The company had promised ‘guaranteed’ pay-outs to customers through investment-linked annuities but could no longer afford them after it failed to hit performance goals.
It meant policyholders suffered huge cuts to the value of either their prospective or existing pensions as the society struggled to stay solvent.
An official inquiry later concluded the Government gave the public a ‘wholly misleading picture’ of the safety of their investments and financial watchdogs were accused of failing to warn investors that Equitable had been in trouble for several years.
Those hardest hit had annuities where payouts were based on stock market returns. In this case, payouts depended on the performance of a with-profits fund. They started out with quite a high income, but then as Equitable Life ran into trouble the payouts began to fall.
A series of critical reports and campaigning for victims – supported by the Mail – eventually led the Coalition Government to create a £1.5billion compensation fund.