EMAG

The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

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Documents: 11/05/2004 - Equitable Life and the Body Politic

Equitable Life and the Body Politic

There are two brands of unwitting pension loss which people hold up as examples of the futility of making pension savings ; one belongs to and they belong to both yesterday's model of pensions and one to tomorrow's.

Perhaps 60,000 employees in firms like ASW, Dexion, UEF, Coalite, Kalamzoo etc found themselves last in the queue for pension fund money when their employer folded. The worst hit had been in their job for most of their working life, had contributed to the employer's pension fund, had counted on it, had seen the Minimum Funding Requirement come in to take away the stain of the Maxwell / Mirror scandal and yet havehad lost up to 90% of their pensions.

Around 1,000,000 people lost money in Equitable Life; 50,000 or so are trapped with-profits annuitants who have lost 30% or more of their pensions, with more cuts inevitable. All of them chose to join a mutual society, a provider which appeared clear about entitlements, which was straightforward and flexible about forced departures, and with low overheads. They were saving for their retirements in a way which we know represents a model for the future and has long been espoused by this government.

There is no doubt that the sight of Trade Union members having arbitrarily lost up to 90% of earned pension entitlements while early-retired director's take full benefit tugs at the guts of the Labour movement. Every one will agree that the losers at ASW etc did not deserve their fate, and that the progressive spend of 2-3 billion over 30 years which has been proposed to remedy the position is justified.

But can any one assert that, present company excepted, membership of a single defined benefit pension scheme for the bulk of one's working life represents the future of pension savings?

Equitable Life has become the brand name, the symbol, that blocks the forward path for pension savings. We are determined that it shall remain so, prominent in the public eye, until those that have suffered from more than a decades of misregulation are compensated.

Who are the Equitable Life claimants, those who were left standing when the music stopped in December 2000? 380,00 plus had individual WP policies, perhaps averaging 30-40,000 in value, while another 500,000 or so were members of some 100,000 group schemes, with probably no greater individual values. Many of these were in the public sector. The NHS had a large group AVC scheme with Equitable (and DTI told NHS it had "no issues" about Equitable when this was set up). MPs, judges, teachers and many others had such policies. Every member of Parliament can expect to have over 1000 affected policyholders or ex-policyholders in his or her constituency. We believe that 4% of households were hit by the Equitable scandal.

A personal perspective: my wife and I will be deciding at the general election whether to host the committee rooms, distribute the leaflets and the rest of it. I know that we are not alone in the Labour Party in sustaining losses, even among our most active ward members. We are watching the Government's moves in this affair with a critical eye. When we see the Government and the PCA scurrying to change their postures in the week before our High Court hearing, it is very encouraging of further efforts with EMAG and very discouraging of support for the Government. Rather than respond to events you could take the initiative and do what you have already considered to be right, to bring the GAD under the eye of the PCA.

If there is one theme that runs through the whole Equitable Life story it is lack of openness. A true set of books was kept by the Society, but the accounts and returns never reflected them. The regulators knew of the discrepancies and concealed their knowledge. The new Board in 2001 promised openness, but the situation of the policyholders is entirely as before. All these parties appeared to share the belief that if the public could can be kept away, things couldcan be patched up. Lack of transparency and sham democracy go hand in glove. This month Equitable's policyholders will be fighting the next battle against that sham demoncracy at Equitable's AGM.

You may believe that the new regime at the FSA has put behind it the mistakes of the past. We have seen it at close range. The operation of the FSA and the Financial Ombudsman Service seems to us to reflect exactly the same fear of transparency.

You cannot understand the Equitable Life affair without understanding that most of the members consciously chose to enter a mutual society, a society which seemed to offer transparencyintegrity, and which insulated them from the jungle that was the world of financial advice a in the past decade. or so ago. If compensation is the motor of our long campaign, a sense of justice is the grease that keeps the wheels turning smoothly.

After our long wait for Lord Penrose's report we are in good heart and have several ways forward to recognition of our case and compensation. The Equitable Life case is not going away and will continue to block the way forward for pensions policy until it is resolved.

We are asking you to commit wholeheartedly to the PCA's likely re-investigation; to enable it to employ adequate resources and be carried out to a high standard and to agree to respect the PCA's conclusions on the role of regulation in the losses that policyholders experienced.

The establishment of the office of PCA was a fine constitutional innovation of an earlier Labour government. For whatever reason, the PCA's first report, as it seemed to us, reflected no honour on her office. The damage can now be remedied. A committed, sober and whole-hearted approach can now take us forward to a positive resolution which will strengthen our body politic after this sorry affair.

Are you going to look backwards or forwards at pension policy?

Tom Lake
EMAG committee member and long-standing Labour party activist.
11th May, 2004