Budget 2013: Older Equitable Life policies will receive compensation

Policyholders of Equitable Life with-profits annuity products from before 1992 are to be compensated, Chancellor George Osborne announced in today's Budget.

Ex-gratia payments of £5,000 will be made to elderly policyholders, with an additional £5,000 available to people on pension credit on the lowest income.

"We're not doing this because we're legally obligated to; we're doing it because quite simply it's the right thing to do," the Chancellor said today.

Poor regulation led life insurance firm Equitable Life to collapse in 2000 after it lost a £1.5 billion court case. This meant a total loss of £4.3 billion for almost a million pension policyholders.

The Equitable Life Payment Scheme was set up by the government to make "fair and transparent payments" to those policyholders who "suffered financial losses as a result of government maladministration" in the regulation of Equitable Life. It has already paid out more than £535 million to more than 370,000 policyholders.

Previously only people who bought policies on 1 September 1992 or more recently were eligible for the compensation, which amounted to 22.4% of the sum each individual lost.

The payments are scheduled for the 2014-15 tax year but could be made earlier. 

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Looking for the lowdown on the government's spending plans for the coming year? Get all the build-up and reaction to George Osborne's speech in our Budget 2013 special.