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Administering the Equitable Life Payment Scheme

The speed with which the Treasury had to set up a scheme to make payments to former policyholders of Equitable Life impeded its ability to design one which worked efficiently and effectively, according to the National Audit Office. The data for making payments was old and incomplete and many practical issues had to be overcome including having to trace over one million people and confirm their identity. As there is still is a large number of payments to be made, the Scheme runs the risk of failing to meet payment targets and overrunning on costs.

The NAO recognizes that the Treasury was given a difficult challenge in setting up the payment Scheme. It had to set up a complex operation in a short period of time so that the first payments could be made by June 2011.But not enough preparation work was done before the Scheme went live. Once the Government announced the decision to launch the Scheme, the Treasury had to design the Scheme’s policy in parallel with delivering the service within a tight timetable. Also, systems had to be developed in the Treasury’s partner in operating the scheme, National Savings and Investments (NS&I), which was a significant departure from normal operations.

The Government’s target of making the first payment by June 2011 was met, but further payments to former policyholders have been severely delayed. It was initially planned that £500 million should have been paid out by the end of 2011-12. This target was not met. By March 2013, the Scheme had made 407,000 payments, totalling £577 million. The Scheme has made only 35 per cent of its total payments and spent 72 per cent of its original administration budget.

The Scheme’s objective of paying all traced former policyholders by the end of March 2014 is at risk. The Treasury plans to close the Scheme in April 2014 having made all the payments to Investors and Groups, and the first two annual payments to those who held an annuity. However, a large number of payments remains to be made in the final year of the scheme.



'Previous NAO work on government compensation schemes has shown that they can be difficult to set up and administer. In the case of Equitable Life, the Government failed to take on board the lessons. Not enough preparation was done in the short lead up to the scheme and problems emerging from poor data caused delays. The Treasury and National Savings and Investments will find it hard to make the remaining payments by the deadline given the scale of the challenge. They now need to produce a realistic plan indicating how and by when they will make the remaining, more difficult payments.'

Amyas Morse, head of the National Audit Office

Notes for Editors

£1.5 billion
Provision made to make payments to former policy holders
1.46 million
Total eligible policyholders
£57 million
Budget to administer the Scheme
£577 million
Value of payments made up to the end of March 2013
Payments made to policyholders up to the end of March 2013
Percentage of members of Group schemes to have received a payment
Payments left to pay at the end of March 2013
17 to 20 per cent
Estimated range of proportion of policyholders who will not be found, despite tracing attempted by the Scheme

  1. The Equitable Life Payment Scheme was set up by the Government in 2011 to provide ex gratia payments to policyholders of the Equitable Life Assurance Society (ELAS). The policyholders lost money when ELAS reduced its annual pay-outs. Policyholders had paid contributions into investments or pensions over the course of their working lives to provide them with retirement income. When ELAS went into liquidation, policyholders saw this retirement income fall dramatically. Policyholders included pensioners and beneficiaries of estates who had now lost some of the income they thought they would have.
  2. HM Treasury was given powers to pay more than a million former policyholders by The Equitable Life (Payments) Act, passed in December 2010. The Treasury engaged National Savings and Investments (NS&I) to be its partner to operate the Scheme.  NS&I is an Executive Agency of the Treasury which outsources operations to ATOS, including those related to the scheme.
  3. Press notices and reports are available from the date of publication on the NAO website, which is at Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  4. The National Audit Office scrutinizes public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of more than £1 billion in 2011.

PN: 23/13