Article from TaxHelp for Older People, with kind permission.
A Glimmer of Hope
When Equitable life pensions collapsed all those years ago, it left thousands of people without the pensions they had planned for. Just last month HM Treasury finally set out how the Equitable Life Payment Scheme will work. In line with the Financial Secretary’s ambition to start making payments by the middle of this year, the Scheme is on track to make the first payments before the end of June.
The Equitable Life Payment Scheme has been set up by HM Government to make fair and transparent payments to Equitable Life policyholders who have suffered financial losses as a result of Government maladministration which was found to occur between September 1992 and the end of 2000 in the regulation of Equitable Life.
If you are an Equitable Life policyholder then you don’t need to take any action at this point. The Scheme will contact all eligible policyholders directly and is expected to start making payments at the end of June 2011.
More details can be found on https://www.gov.uk/guidance/equitable-life-payment-scheme
Only the policies listed below are eligible for the scheme
1. An Equitable Life Conventional With Profits (CWP) policy bought between 1 September 1992 and 31 December 2000.
2. An Equitable Life With Profits Annuity (WPA) bought between 1 September 1992 and 31 December 2000.
3. An Equitable Life Accumulating With Profits (AWP) policy (both individual and Group scheme policies) that either started between 1 September 1992 and 31 December 2000 inclusive or had a premium payment made into it between 1 January 1993 and 31 December 2000.
The Scheme will start making payments at the end of June 2011. It is anticipated that all AWP and CWP policyholders due a payment will have received their single lump sum payment by mid 2014. WPA policyholders eligible for a payment, can expect to receive their first payment in the first year of the scheme.
Policyholders who hold a With Profits Annuity policy that started before 1 September 1992, took out their policy before the period in which it has been determined any regulatory maladministration might have affected their investment decision and will not be compensated.
The lump sum payments will not be eligible to tax.
In summary: this is how the payments will be calculated.
Relative losses on With Profits Annuities will be covered in full.
For Relative losses on Accumulating With Profits or Conventional With Profits policies, the Equitable Life Payment Scheme design incorporates the principles recommended by the independent commission which are:
· Policyholders will receive 22.4% of their Relative Losses.
· If the Relative Loss is less than £10 then no payment will be made. This is to avoid disproportionate administration costs, in line with the Independent Commission’s recommendations.
· If individuals have more than one AWP or CWP policy then Relative Losses will be offset against Relative Gains on all of these policies. This means that any Relative Loss would be reduced if a policyholder has other policies that have made a gain.
This article is by TaxHelp for Older People (TOP) registered charity no 1102276, offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066.