MPs publish report on Equitable Life

26 July 2013

The Public Accounts Committee publishes its 17th Report of this Session which, on the basis of evidence from the Treasury, National Savings and Investments (NS&I) and representatives of the Equitable Members Action Group (EMAG) and Equitable Life Trapped Annuitants (ELTA) on the design and operation of the Equitable Life Payment Scheme.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today 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.

“By March 2012 just £168 million had been paid out to policyholders - a third of the £500 million expected.

“Only 35% of policyholders have received payments despite 72% of the budget being spent.

“20% 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.

“This includes doing everything possible to find missing policyholders. When we took evidence we were stunned to hear that Treasury had refused to accept the details of 350,000 policyholders from the Equitable Life Members Action Group on the basis of ‘data protection issues.


“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.” 

Margaret Hodge was speaking as the Committee published its 17th Report of this Session which, on the basis of evidence from the Treasury, National Savings and Investments (NS&I) and representatives of the Equitable Members Action Group (EMAG) and Equitable Life Trapped Annuitants (ELTA) on the design and operation of the Equitable Life Payment Scheme.

Compensation Scheme

In 2010 the Treasury was given powers to make payments to just over a million former policyholders of the Equitable Life Assurance Society. The Treasury engaged NS&I, an Executive Agency of the Treasury, to operate the Scheme, and NS&I out-sourced it to Siemens. The Siemens contract was subsequently bought by ATOS. At the end of March 2013, the Scheme had paid out a total of £577 million to 407,000 policyholders.

The Treasury failed to learn the lessons from previous government compensation schemes when setting up the Scheme. The Treasury focused on an arbitrary deadline of June 2011 for making the first payments to policyholders, at the expense of planning properly for how the Scheme would be administered and running a pilot to test the scheme. The experiences of previous government compensation schemes—for former miners and Icelandic trawlermen—should have alerted the Treasury to the importance of early investment in getting the systems and governance arrangements right, and the potential value of pilot work in exposing risks. In the end lack of good planning led to unacceptable delays in payments with only £168 million paid out by March 2012 against an anticipated £500 million.


The Treasury should undertake a lessons-learned exercise on the Scheme, informed also by previous government compensation schemes. It should report back to us on the results and on how it will ensure these lessons are applied to both the current scheme and any future schemes introduced by the government.


The Treasury and NS&I cannot demonstrate that they have achieved value for money in their contract with ATOS to administer the Scheme. NS&I is reimbursed by the Treasury for the costs of managing and administering the Scheme.  Those operations which are performed by ATOS are charged to NS&I on the basis of a time and materials contract. Clearly paying ATOS in this way provides no incentive for the company to act efficiently and speedily. Furthermore, many claimants alleged duplication and unnecessary extra correspondence which is frustrating to the claimant and wasteful to the taxpayer. This makes NS&I’s monitoring of ATOS crucial to ensuring only necessary activities are paid for by the taxpayer—but that monitoring has not been effective.  Without any effective control, this leaves ATOS with the potential to pass on unnecessary costs to NS&I. 


NS&I must improve its control over the costs of administering the Scheme, and report regularly to the Treasury on its validation of ATOS activities and performance.


The Treasury has not used all the information available to trace as many policyholders as possible. The Treasury currently estimates that it may not trace some 17-20% of policyholders—between 200,000 and 236,000 people eligible for a payment. It did not accept data on over 350,000 policyholders provided by the EMAG, which could have enabled it to track down more policyholders, claiming this would have resulted in data protection issues. However, it has not explored what more it could do to overcome these issues and use the data held by EMAG. It is imperative that the maximum number of policyholders is identified before the Scheme closes.


The Treasury must look again at what cost-effective approaches could be used to trace more policyholders. Specifically, Treasury and NS&I should, with immediate effect, work with EMAG to explore options for utilising EMAG’s data to contact policyholders who have not yet received a payment.


The quality of service provided to some policyholders has not been good enough. NS&I has not met the targets set by the Treasury for responding to policyholders’ queries and dealing with complaints. We heard of cases where policyholders received duplicate requests for the same information needed to process their claim, and of policyholders with specific queries who received a series of generic letters in response, which failed to address the query raised. The scheme still has 664,200 payments worth £370 million left to pay by 2014.


NS&I must improve the quality of customer service provided by ATOS, including stopping duplicate requests for information and the inappropriate use of standard template letters.


Policyholders do not receive sufficient explanation of how their payments have been calculated. Individuals have a right to understand how their payments have been calculated and on what basis.  But recipients are not provided with explanations of how their payment calculations have been made. The Treasury is now responding to those cases where people have specifically asked for more information. The Treasury and NS&I are entirely reliant on calculations performed by the actuary Towers Watson, and accepted that, in some cases, the underlying data had been incorrect.


The Treasury should write to the Committee outlining what action it has taken to make sure the data used by Towers Watson are correct, and what it will do make sure policyholders receive better and fuller explanations on how their payments have been calculated.


We are concerned that some policyholders will miss out on their entitlement to compensation because of an arbitrary deadline for closing the Scheme in March 2014. The Treasury’s objective is to pay all eligible policyholders by March 2014. The Treasury and NS&I do not plan to publicise the closure of the Scheme until September, which limits the time allowed for some policyholders to find out about the closure and submit their applications for compensation. It also raises the potential for NS&I to receive a late surge in the number of applications, and they may struggle to process them in time.


The Treasury should bring forward its planned publicity of the closure of the Scheme.

Further information

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