Probably not such an Equitable Life ‘Henry’!/ Compensation finally looms

It is nearly 10 years since the demise of what was declared the ‘oldest mutual organisation in the world’, first formed in 1762. And in a variation to many of the ‘Henry’ clients portrayed in the television adverts, it turned out not to be such an Equitable Life after all. Sadly, it is estimated that some 50,000 policyholders have died waiting for any form of compensation to be paid since 2000(Source/Report: Daily Mail, July 2010).

Finally, this week, it is reported that the details of a £1.5 billion compensation package will be announced and finalised by the Coalition Government after nearly a decade of delays, enquiries, arguments and disagreements, including investigations by the Parliamentary Ombudsman. This is way short of the £6.0 billion package that many felt was required. Although this announcement will be a momentous occasion in itself, I am not sure it will make the top headlines it deserves because it will come in the Comprehensive Spending Review that will have many other (mainly negative) headlines of its own. Wednesday the 20^th October 2010 will be a day of history whatever happens.

And what now for the policyholders? Bearing in mind that the with-profits fund at the end of 2000 had an estimated value of around £26 billion (source: Wikipedia), you might see that the proposed £1.5 billion in the big picture may not spread very far, although admittedly something is better than nothing! I understand that they may start to provide compensation to those who have or are suffering ‘hardship’ and this might, as an example, include those that took out a with profits annuity which has seen the income first projected fall away over the years. Others who have not suffered any ‘hardship’ but seen their investment bond, pension (executive pensions/ Section 32/retirement annuity) or income drawdown go down in value may find themselves lower down the pecking order of compensation payments. I have no doubt that the devil will be in the detail on this one, but I believe that the principal of priority list is correct.

We are likely to know after Wednesday. I am only sad that it has taken so long to get this far.

Whatever the outcome of the Equitable Life compensation scheme and its subsequent effects, it is always worth seeking independent financial advice (IFA) to ensure that you are getting the best from your financial planning.

This article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse, Chartered Financial Planner

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited.

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