Budget 2013 Announcement on pre-September 1992 Equitable Life With-Profit Annuitants

21 March 2013

The Chancellor announced in Budget 2013 that the Government will make an ex-gratia payment of £5,000 to Equitable Life policyholders who bought an Equitable Life With-Profits Annuity (WPA) before 1 September 1992 and are aged over 60. An additional £5,000 will be available to those policyholders who meet the above criteria and are in receipt of Pension Credit.

This announcement follows representations the Government has received arguing that a specific group of approximately 9000 elderly policyholders who bought their WPA from Equitable Life before 1 September 1992 should be included within the wider Equitable Life Payment Scheme (“the Scheme”). The Government remains of the view that there is no basis for their inclusion within the Scheme. The reasons for the exclusion of this group of policyholders are well documented, and have been subject to debate in Parliament. It is clear, however, that this particular group of policyholders are under financial pressure in their final years, as they have not received the income they hoped for from the Equitable Life annuity they bought over 20 years ago.

Legislation will be required to facilitate these payments, which will be brought to Parliament later this year. The payments will be made in the financial year 2014-15 or earlier if possible, and will be separate from the wider Equitable Life Payment Scheme.

The Government will make further announcements in the coming months.

Why is it taking until 2014-15 to make payments?

The regulations that govern these payments need to be put through a Parliamentary process. This is expected to be completed in 2013. Following this process we will also need to finalise the systems to implement the approved regulations. The Government therefore anticipates payments commencing early in the financial year 2014-2015 or earlier if possible.

Why is the amount £5,000?

Considering the financial pressures on the public purse, the Government believes that £5000, with an additional £5000 for those in receipt of Pension Credit, is an appropriate and reasonable level of payment.

What is the extra £5,000 for those in receipt of Pension Credit?

The Government recognises that this is a very varied group, with different circumstances. Therefore the Government wants to focus the available funds on those policyholders who needed it most. If someone is in receipt of Pension Credit they will have had their financial situation assessed, and will have a low income. More information on the rules around these payments will be published later in the year.

Why aren’t deceased policyholders included?

These payments are to help this group of elderly policyholders who may be living with a reduced annuity income. Because these payments are chiefly intended to help relieve some of the pressures associated with this, we have decided not to make payments to those policyholders who are already deceased. This is also in order to maximise the payment available to living policyholders. However, should an annuitant pass away after the announcement before receiving their payment, this payment will pass to their estate.

How will this affect the wider Equitable Life Payment Scheme?

The wider Equitable Life Payment Scheme will be unaffected by these payments. The rules and design of the Scheme will stay the same, and all necessary funds remain in place to make payments to eligible policyholders.

How is the Government able to afford these payments?

These payments are funded by savings identified in the budget for the Equitable Life Payment Scheme. As with any new policy announcement in the Budget, this policy has been subject to certification by the Office of Budgetary Responsibility.

Will these payments be free of tax/affect entitlement to other benefits?

This will part of the regulations brought before Parliament later this year.

What should I do now?

There is no need for you to do anything at this stage. Those appointed by the Government to make these payments will be in touch with all pre-1992 Equitable Life With-Profits Annuitants in advance of these payments being made. In addition, updates will be provided on HM Treasury website periodically.