It's still just promises for a million pensioners

Victims of Equitable's collapse, and failed company schemes, are still struggling

The Observer, Sunday December 16 2007

It's been a disappointing and unsettling week for pension investors. Ann Abraham, the Parliamentary Ombudsman, has confirmed that publication of her report into the collapse of Equitable Life has been delayed a third time, and is unlikely to be ready before April.

The news has disappointed nearly 1.3 million policyholders, whose pension funds plummeted in value in 2001 when the insurer was forced to admit it could not afford to meet its liabilities, and closed to new business. Policyholders hoped that Abraham would publish her report in time for Christmas, find the government and its financial regulators at fault for allowing Equitable to get into such a weakened condition, and recommend compensation.

Meanwhile 125,000 investors whose company pension schemes collapsed between 1997 and 2005 have been left in suspense. Several weeks ago, pensions minister Mike O'Brien told Cash he was confident there would be 'good news' for them by the end of November, and pensions secretary Peter Hain is reported to have told one of his constituents that the Department of Work and Pensions had found £725m to boost their payments. But last week reports emerged that Prime Minister Gordon Brown and Chancellor Alistair Darling had blocked the DWP's plans for an improved rescue package.

Then on Wednesday, in an apparent U-turn, Brown told the House of Commons he was hoping that, in the next few days, he would be able to 'guarantee' an increase in Financial Assistance Scheme Payments (FAS) from 80 to 90 per cent for all the 125,000 affected by losses.

Unions and campaign groups have long argued that the government should pay compensation to the 125,000 pension scheme members. Abraham found the government culpable for publishing misleading information about the security of such schemes and recommended that it should compensate those affected. Her findings were upheld by the High Court, but the government has so far resisted offering full compensation or even the 90 per cent index-linked income that can be paid by the Pension Protection Fund (PPF) from the age of 60 to those whose schemes collapsed from 2005 onwards. Instead, the 125,000 are currently eligible for 80 per cent of their 'core' pension - without additional benefits or indexation - when they reach 65.

Ros Altman, spokeswoman for the Pensions Action Group, is sceptical that Brown is intending to match the income paid by the PPF. 'Earlier this year, Gordon Brown announced that [the 125,000] would all get 80 per cent of their pensions restored. The reality, however, is that thousands are still totally excluded from the FAS and many of the victims who are years past their retirement age have still not had anything at all.

'The Prime Minister needs to explain what his statement means - 90 per cent of what? When will payments be made? Will thousands of those affected still be excluded from the FAS, despite the assurances that "all" the 125,000 would be helped?

'On Saturday, Peter Hain told one of his constituents that the DWP review had found enough money to pay at least the same benefits as would be paid by the Pension Protection Fund, but that is not what the Prime Minister told the House today. Why not? Is it because the DWP has not managed to persuade the Treasury to sort this scandal out fairly and properly? Is the Prime Minister determined to prolong the agony and string the scandal out still longer? We need to know.'

Many of those affected by the collapse of Equitable and the company pension schemes have reached retirement age by now. Some are living on reduced means, others continue to work to make ends meet long after they intended to retire.

Gabrielle de Pauw, 65, is one who has lost a large part of her pension through no fault of her own. When her husband was arranging to take his Equitable annuity in 1992, he made provision for her to receive a widow's annuity in the event of his death.

He took his first annuity payment, then died just four days later from a massive brain haemorrhage. As she says, it was the equivalent of him 'receiving the retirement clock and then dropping dead on the way out of the party'.

The situation she was left in was a difficult one, emotionally and financially, but she gradually came to terms with it - at least at first. 'My pension was sufficient for me to manage so long as I was careful, but all that changed when the trouble started with Equitable,' she says. 'Now, my so-called "with profits" annuity is about 40 per cent less than it was and I am desperately worried about the future. I can't afford to stay where I live in Islington but dread all the upheaval of moving. My health has suffered badly in the last few years, much of it due to stress.

'What makes me furious is the attitude of the government, that can within a few days bale out Northern Rock to the tune of an extreme amount of billions (and I bet us taxpayers don't get it back, despite what Alistair Darling says), but happily put the boot into people like the Equitable victims and those poor souls whose occupational pensions have evaporated when their firms went bust.

'I still seethe when I remember how Ruth Kelly, speaking for her puppetmaster Gordon Brown when he was Chancellor, implied that most Equitable victims were relatively wealthy people. How dare she? I know of fellow victims who are living on a pittance and others who have died waiting for justice.

'I have no great hopes that the Parliamentary Ombudsman's report will get us any justice. The government seems to ignore her recommendations, so what's the point of having an ombudsman?'