Press Coverage - 15 December 2008

More compensation delays for Equitable policyholders

By Andrea Felsted and George Parker

Published: December 15 2008

More than a million policyholders who lost billions of pounds in the Equitable Life debacle must wait until the new year to find out whether the government will pay compensation.

The government said yesterday it would delay from next week until parliament returned in January, its response to a damning report by Ann Abraham, the parliamentary ombudsman, which set out a series of regulatory failings over Equitable and called for policyholders to be compensated.

Disclosure of the delay comes just days after Ian Pearson, economic secretary to the Treasury repeatedly insisted to MPs that the response would be made “very shortly”.

It also comes after Gordon Brown had promised in the Commons that a government response on the Equitable case would be forthcoming before Christmas.

The Treasury insisted that it would set out its position soon and that ”timetabling” ministerial time before Christmas to deal with the issue had proved impossible.

The hold-up appears to further diminish the hopes of Equitable members and policyholders that compensation, estimated to cost about £4bn, might be imminent.

On Tuesday Mr Pearson revealed that the government had not yet carried out any detailed analysis on how much it would cost to compensate policyholders for the losses incurred when Equitable came close to collapse eight years ago.

However, Paul Braithwaite, general secretary of the Equitable Members Action Group, an independent association of Equitable members and policyholders was hopeful that a later statement could be good news for policyholders.

“It is my impression that Labour backbenchers have become increasingly uneasy about the ramifications at the ballot box and that has caused the rethink and the hiatus. Finally the government has decided that it cannot any longer ignore and turn its back on [us]. The sense of outrage in the light of more and more of the bail-outs that we have seen is highlighting the injustice,” he said.

“It is an outrage that the Prime Minister continues to treat our policyholders with such contempt,” said Vanni Treves, chairman of Equitable.

George Osborne, shadow chancellor, accused Gordon Brown of betraying Equitable Life policyholders.

Mr Osborne said: ”Even in parliament Gordon Brown’s word is worth nothing.

”He has broken the promise he gave just days ago and betrayed thousands of Equitable Life savers waiting for justice.

”The Parliamentary Ombudsman’s report is a damning indictment of Gordon Brown’s failings as Chancellor and we don’t have to wait until after Christmas to know that the recommendations should be implemented and savers should be treated fairly.”

MPs lend weight to call for Equitable payout

Miles Costello, The Times
December 15, 2008

A group of MPs has called on the Government to apologise to Equitable Life policyholders and to pay them compensation, thus turning up the heat on Gordon Brown before a formal decision early next year.

The Public Administration Select Committee said that it “strongly supports” the findings of a report into the near-collapse of Europe's oldest mutual published by Ann Abraham, the Parliamentary Ombudsman, in July. Ms Abraham found three government departments guilty of ten counts of maladministration over Equitable, berating their failure to spot signs that it was in trouble. She said that the Government should say sorry and set up a compensation fund within six months.

The committee, which questioned Ian Pearson, the Economic Secretary to the Treasury, on the Equitable fiasco last week, condemned the Government for delaying its response to the report until January.

Harriet Harman, the Leader of the Commons, sparked outrage last week when she told Parliament that policyholders would have to wait until the House reconvenes after Christmas. Mr Brown had personally promised the previous week that a formal response would be forthcoming before Parliament went into recess on Friday.

The committee urged the Government to act swiftly and to pay compensation wherever it was reasonable. Tony Wright, the chairman, said: “The one advantage of this delay is that ministers will be able to take full account of our views. But justice has been delayed for far too long already.

“The Ombudsman has shown in exhaustive detail how the regulators failed over a prolonged period and at a fundamental level. Under the circumstances, compensation should be a duty, not a matter of choice.”

Equitable almost collapsed in 2000, with policyholders losing an estimated £4 billion, after the House of Lords ruled that it must meet its obligations on guaranteed annuity policies sold to more than one million customers. 

The Daily Mail, 15th December

The heat's on Darling over Equitable Life victims as Ombudsman files her findings

Chancellor Alistair Darling hinted at bailing out stricken policyholders

Pressure will intensify today on the Government to compensate a million victims of the Equitable Life scandal when a powerful group of MPs calls for swift justice.

Official institutions meant to oversee the insurance giant have already been blamed by the Parliamentary watchdog for the loss of investors' money and pensions. But ministers have refused demands to pay out around £4billion in redress.

Alistair Darling hinted last month that he is considering bailing out stricken policyholders, but there will be no formal announcement until January – two years after the regulatory failings first came to light.

In a move that turns up the heat on the Chancellor, the Commons' public administration select committee today urges the Government to accept 'without delay' the damning findings of Parliamentary Ombudsman Ann Abraham.

It also gives strong backing to an 'independent, transparent and simple' compensation scheme, with payments administered by a tribunal and made within two years.

Many policyholders have died while awaiting compensation and others are now advancing in years. The committee's report warns: 'Justice further delayed will mean justice denied to even more people.'

Committee chairman Tony Wright said: 'It is unacceptable that the situation has remained unresolved for so long. Compensation should be a duty, not a matter of choice.'

The MPs are also highly critical of the failure by ministers to order a 'comprehensive and fit-for-purpose investigation at the outset' instead of the piecemeal inquiries which followed the scandal.

In July, Ms Abraham ruled that 'serial regulatory failure' was responsible for the near collapse of Equitable Life in 2000.

Her scathing report concluded that three Government bodies - the former Department of Trade and Industry, the Government Actuary's Department and the Financial Services Authority - were guilty of ten counts of maladministration.

Lib Dem Treasury spokesman Vince Cable said the committee's report was another 'damning indictment of regulatory failure'.

'After months of dragging his feet, Gordon Brown must now apologise to policyholders and take action to deal with financial compensation,' he said.

'The Government should apologise for the years of delay, anxiety and unanswered questions suffered by policyholders.'

Equitable Life - Britain's oldest mutually-owned insurer, set up in 1762 - came close to going under after making gold -plated promises to its policyholders which it could not afford to keep.

Half the value of more than a million customers' savings was wiped out, earning it the nickname Equitable Death. Investors claim they lost a total of £4billion in three policy devaluations.

Before the implosion, the firm was seen as one of the safest places to invest in Britain.

It would be almost unprecedented for the Government to wholly ignore the Ombudsman's findings, which have been rejected only a handful of times in its 41-year history.

And the last time the public administration select committee got involved after an Ombudsman's report it led to a £3billion compensation payout to victims of collapsed company pensions.