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.