Equitable crusader stays out of compensation fight
Equitable Life policyholders have suffered a setback in their campaign for higher compensation after the Parliamentary Ombudsman distanced herself from their call. Ann Abraham, a consistently champion of policyholders at the insurer, has told a cross-party group of MPs that it was not her job to question a payout scheme that has received parliamentary approval.
In a letter sent to MPs, and passed to The Times, Ms Abraham also wrote:
‘While I recognise that some of the people who complained to me will be extremely disappointed by the Government’s decisions on affordability and eligibility, I cannot say that those decisions are incompatible with the recommendations in my report.’
Her comments will come as a blow to Equitable campaign groups, which have already expressed dismay at the Government’s plans to pay out £1.5 billion to policyholders in stages, beginning next year.
The payout, agreed after years of wrangling, represents as little as 15% of the amount lost by savers in Equitable’s near demise a decade ago.
Equitable, at the time Europe’s biggest mutual, had to close to new business following the House of Lords ruling in 2000 that it had to honour its financial obligations to customers holding guaranteed annuity policies. This left it facing £1.5 billion in liabilities. More than a million customers lost out when the society slashed bonus payouts, with hundreds of thousands seeing the value of their retirement nest eggs halved.
In a hard–hitting report published last year, Ms Abraham found successive governments guilty of a ‘decade of regulatory failure’ for failing to spot Equitable’s problems.
Having initially rejected all but four of Ms Abraham’s ten counts of maladministration, the Government backed down earlier this year and accepted her findings in full. She had demanded a compensation fund be set up within six months of her report being published in July 2008. She said policyholders should have been compensated for their ‘relative losses’ — their financial suffering set against potential returns from investing elsewhere — a figure accepted as £4.8 billion.
The Times, Miles Costello, 24 Dec 2010
Equitable Life pressure group goes to court over ‘derisory’ payout
After years of campaigning for compensation, lobby group EMAG is squaring up for a courtroom battle with the Treasury next year.
The lobby group for policyholders unveils plans to sue the Treasury over a ‘derisory’ £1.5 billion compensation scheme.
The lobby group for Equitable Life policyholders vowed to pile the pressure on the Government yesterday as it unveiled plans to sue the Treasury over a ‘derisory’ £1.5 billion compensation scheme.
EMAG, which has been campaigning for a decade on behalf of one million Equitable policyholders, has kicked off a legal process that should lead to a judicial review of the Treasury’s controversial payment scheme in February.
Pending clearance from the Court, that could result in EMAG, which has won a previous legal showdown with the Government, squaring up for a courtroom battle with the Treasury during the first half of next year.
Paul Braithwaite, EMAG’s general secretary, said:
‘We will pursue every legal and political avenue open to us to get proper justice for our members. We believe that the current package is unfair and it’s not the proper compensation coalition MPs promised to fight for.’
It is the latest move by EMAG, which has 40,000 members and a sizeable fighting fund, since the Treasury dismayed policyholders in October when it published its compensation proposals for customers of the near collapsed mutual.
George Osborne, the Chancellor, has proposed a £1.5 billion package spread over three years, and promised to prioritise Equitable’s most needy with–profits annuities policyholders.
Payments, which Mr Osborne argues must take account of the Government’s cash–strapped finances, are due to begin next year. EMAG complains that thousands would miss out on compensation payments that are 85 per cent below the amount it expected.
‘We’re crying foul,’ an EMAG spokesman added. He said that the group would fund its legal action from its own resources, but said that it would have to go to members for additional contributions if the legal bill mounted.
About 1.5 million policyholders lost out in 2000 when Equitable, Europe’s biggest mutual, was brought to the brink of collapse by a House of Lords ruling that it must honour obligations to guaranteed annuities customers.
The £1.5 billion liability that this incurred forced Equitable to shut to new business and slash bonus payments. A core group of about 500,000 customers saw the value of their nest eggs halved overnight and tens of thousands have died during the ten–year campaign for financial remedies.
The Government, with advice from Towers Watson, the pensions consultant, has accepted that the ‘relative losses’ suffered by Equitable members, who could have invested elsewhere, stands at £4.8 billion. EMAG, however, argues that the real figure for relative losses is £6.2 billion.
EMAG, which is being represented by the law firm Bindmans, is planning to contest Treasury calculations for the amounts of compensation, together with its decisions on who should receive benefits.
About 10,000 customers who took out policies before a 1992 cut–off date will be excluded, for example. The Treasury has also ignored the costs incurred by policyholders who cancelled their Equitable policies and switched elsewhere to try to recoup savings.
The Treasury plans to respond in writing on December 23rd to EMAG’s proposed legal action.
The Times, Miles Costello 10 December, 2010
EMAG’s press release about exploring a Judicial Review against the Treasury’s compensation plan.
Europe backs Equitable Life campaign
European politicians have thrown their weight behind Equitable Life campaigners, describing the UK Government’s attempts to compensate victims of the scandal as a ‘sorry and shabby business’. On Friday, the Independent Commission on Equitable Life Payments (ICELP) will close its first consultation as it looks to advise the coalition Government on how to compensate policyholders.
Members of the European Parliament debated the issue at a Petitions Committee ahead of the closure of a key UK consultation on plans to hand £1.5bn to policyholders, a decade after the company’s near–collapse.
Mairead McGuinness, chairman of the committee, said she was concerned to hear about the ‘injustice among policyholders’ amid accusations that the level of compensation is well below the £4bn to £5bn hoped for by some policyholders.
Alex Voss, a centre–right German MEP, added that he would like to hear more from the UK Parlimentary Ombudsman, Ann Abrahams, who submitted a written statement to the Petitions Committee in which she distanced herself from proposals to pay reduced amounts of compensation to Equitable’s victims.
In 2008, Ms Abraham delivered a damning report which found 10 instances of maladministration by regulators and Whitehall officials leading up to 2001. She called for the previous Government to apologise and set up an independent tribunal to calculate compensation for them. However, the Labour administration refused to accept the report’s findings.
On Friday, the Independent Commission on Equitable Life Payments (ICELP) will close its first consultation as it looks to advise the coalition Government on how to compensate policyholders.
Investors, mainly professional people saving for their retirement, lost up to half their savings when the company came close to collapse.
Under the terms of the proposed scheme, £620m of the £1.5bn would be used to cover the full cost of ‘relative’ losses suffered by the 37,000 with–profits annuitants. However, The Equitable Life Members Action Group (EMAG) has warned that another 600,000 policyholders who lost substantial amounts look set to receive less than a quarter of the Treasury’s calculated losses.
Paul Weir, EMAG director, said ICELP had the ‘impossible task of sharing out the remnants of an inadequate pot of money’.
‘EMAG deplores that the Treasury has retrospectively clawed back the core responsibility that the Ombudsman intended for the independent Commission: to decide the allocation of compensation between the different policyholder classes and to design and administer the scheme. This is now firmly back in the clutches of the not–to–be trusted Treasury, one of the regulators the Ombudsman found culpable.’
Daily Telegraph, Jamie Dunkley 3 Dec, 2010
A battle is lost but Equitable war rages on
Financial Mail trusts Mark Hoban, Financial Secretary to the Treasury, knows what he is getting into by refusing to listen to those who passionately believe the current Equitable Life compensation package is seriously flawed.
Yet again the war drums are beginning to beat and although policyholders would never resort to the violent tactics of some students over university fees, Hoban would be foolish if he thought these elderly people will go off quietly into the night. They won’t — as ten years of fighting for financial justice already proves...
...in moving hastily, Hoban is in danger of dishing out serious financial injustice, especially to those 10,000 ‘early’ with-profits annuitants excluded from compensation on the spurious grounds that they were as much financial winners from regulatory maladministration as they were losers...
In the House of Commons earlier this month, Hoban used the following figures to justify why pre–1992 with–profits annuitants should not receive compensation. He said a with–profits annuitant who received annual income of £7,200 in 1989 would have received £10,000 in 1993, rising to £17,000 in 2002. The early uplift in income, a result of Equitable Life overpaying bonuses, Hoban said, more than made up for the cuts post–2002. In other words, they have not suffered financial loss as a result of maladministration.
This is poppycock because Towers Watson’s figures don’t tally with numbers supplied by with–profits annuitants who have contacted Financial Mail...
In the debate that Hoban produced his spurious figures, Fabian Hamilton, Labour MP for Leeds North East, attempted to bring in an amendment ensuring all with–profits annuitants received compensation...
Peter, 84, who served on HMS King George V during the Second World War in the Pacific watched the debate on TV in the hope that Hamilton’s amendment would get voted through. It didn’t.
He told Financial Mail on Friday: ’We older pensioners are not asking for charity, but would welcome proper consideration of the situation. We listen to politicians promising fairness and telling us that “we are all in this together”.
’We then watch a handful of MPs debate an issue so important to old pensioners and then listen (with no surprise) to the result of the division — 70 in favour of Hamilton’s amendment and a whopping 301 against, voting as instructed.’
Peter feels cheated — and has told Hoban so in a letter. His view is shared by all 10,000 early with profits annuitants. Maybe, Hoban feels these with–profits annuitants (all elderly) will quietly go away or die...
The Equitable Life debacle, it seems, is far from over. There are more wars to be fought before justice can be seen to be done.
Jeff Prestridge, Mail on Sunday 28th November, 2010
Mark Hoban:"Let me explain why 1 September 1992 is a logical, not arbitrary, date. The Ombudsman indicated in her report that there were problems with the regulatory returns for 1991, and that those could influence policyholder behaviour.
However, they could not have come to the attention of policyholders, and prospective policyholders, before they were submitted at the end of June 1992. No policyholder would have been aware of that regulatory failure until the returns had been published. It is unlikely that those returns would have come to anyone’s attention prior to 1 September 1992.
I stress that the date is not arbitrary, but a consequence of the ombudsman’s findings and how they impact on what policyholders would have been aware of. Policyholders would not have been aware of the regulatory failure until the autumn of 1992...
The Ombudsman is concerned about people who invested in Equitable Life who might not have done so had they been aware of that regulatory failure. That regulatory failure would not have been known to them until September 1992, so there is a clear, rational argument for 1 September 1992 being the right date to start the calculation of losses.
We are excluding that group of people because they took out policies before any maladministration could have affected their investment decision...When people made the decision on the information available to them, the relevant information was not in the public domain, and would not have affected their investment decision until September 1992. That is a clear, logical, sensible starting point, based on principles and on the ombudsman’s findings, for the maladministration, and that is the point from which we should calculate relative loss for policyholders.
Mark Durkan: The Minister is in danger of asking the Committee to accept the notion that customer ignorance can be a legislator’s excuse. That cannot be so. If the Minister is trying to say that what they did not know did them no harm, that is preposterous. They did not know, and they have suffered harm.
Mr Hoban: I do not agree with that point. There is a clear principle: the basis on which people were investing in Equitable Life. At that point, no–one knew about the maladministration.
We should also bear in mind the issue of practicality and the lack of information available to Equitable Life’s policyholders. Hon. Members should reflect on the fact that no one would have made investment decisions based on anything that happened prior to 1992 until that information was in the public domain. That is why the group has been excluded from the calculation of relative loss.
Mr John Baron ...surely the central point is that annuitants who took out a policy pre ’92 suffered relative loss post ’92, courtesy of maladministration. To return to an earlier point, perhaps there is a moral duty to include such people in the compensation, as I believe that the parliamentary ombudsman suggested.
Mr Hoban: The Parliamentary Ombudsman’s findings were clear: she said that the maladministration started in 1991, but that it would not have been obvious to policyholders until September 1992.
Let me deal with two issues that hon. Members should have take into account in assessing the point. First, as has been mentioned, there are challenges around getting information for the pre ’92 period. Secondly, there is the point made by my hon. Friend the Member for Cardiff North about the timing of losses. We recognise that pre ’92 with-profits annuitants were affected by how Equitable Life was run. Sir John Chadwick and Towers Watson looked into what those WPAs would have received from Equitable Life had there been no maladministration. They concluded that they (the pre 1992s) received more from Equitable Life as a result of maladministration than they would have done had it been properly regulated. That was because Equitable Life paid out more to them in the early years than it would have done had there been no maladministration. Let me give an example to prove that.
If a with–profits annuitant had purchased their policy in 1989 and gained through that purchase an income of £7,200, by 1993 the policyholder would have been receiving an annuity of approximately £10,000 per annum. Part of that sum was a result of the bonuses that had been declared on the policy since commencement. It is recognised that Equitable Life was paying higher bonuses than it could afford during the late ‘80s and early 1990s. If Equitable Life had not been over-bonusing during that period, Towers Watson has calculated that the policyholder would have received only £9,500 per year. It is a consequence of the maladministration that the policyholder is receiving £500 more than he or she should have during that period.
Equitable Life continued to overpay bonuses throughout most of the 1990s. As a result, by 2002 that policyholder was receiving £17,000 per annum. If the over-bonusing had not taken place, the policyholder would have received only £15,800, so he or she was still receiving more as a consequence of maladministration.
In 2003, Equitable Life cut the rate of annuity payments to its with-profits policyholders by about 20%. In the absence of maladministration, the value of payments to with-profits policyholders would also have been cut, although, owing to market performance, by only 18%. After the cuts in 2003, our example policyholder was receiving £12,900 per year from Equitable Life. Had there been no maladministration, he or she would have been receiving only £12,300. I hope that that example has helped to clarify the consequences of maladministration, namely that even after the cuts in 2003 policyholders are still receiving more than they would have if Equitable Life had been properly regulated. For a range of reasons, their plight is not as it has been represented.
The first question to be asked, then, is "When did maladministration affect policyholders and the decisions that were made?" The second relates to the practicality of extracting data pre-1992, which is well established and has been well aired in the Chadwick report and elsewhere; and the third concerns the consequence of maladministration in Equitable Life, which is that with-profits annuitants are receiving more over the lifetime of their policy than they would have received if that maladministration had not taken place.
Jonathan Evans: I was interested in the way in which my hon. Friend dealt with my point about over–bonusing, but I feel that he has undermined another point that I made: I suggested that it was not possible to make such calculations, but my hon. Friend has suggested that Towers Watson has done so. In a sense that also undermines the thrust of why the pre–1992 policyholders should be excluded. I had assumed that they might not have been disadvantaged and that it was too difficult to work out the numbers, but if Towers Watson has worked out those numbers and there is no relative loss, it seems a bit odd not to include them, at least for the purpose of calculating the position and telling them that there is no loss..."
Read the whole Committee Stages and Third Reading of the Equitable Life payment Bill, 10 November 2010
More than 10,000 pensioners who took out with-profits annuities in the late Eighties and early Nineties with Equitable Life have been excluded from the Government's £1.5billion compensation, announced as part of the spending review.
The decision has sparked outrage among pressure groups representing annuitants, who claim that the Government has turned the payment of compensation into a ‘lottery’.
The Treasury confirmed on Friday that with–profits annuities taken out before September 1992 are excluded. But those who set up policies later — about 37,000 customers — are included.
The September 1992 cut–off date has been imposed because the Treasury claims annuitants who bought earlier did not make investment decisions that were affected by the Government's maladministration of Equitable Life, leading to the mutual's near-meltdown in 2000.
The £1.5 billion package is compensation for the relative losses suffered by policyholders as a result of the failure of previous governments to regulate the mutual effectively.
Peter Scawen of pressure group Equitable Life Trapped Annuitants says the cut–off date is ‘unfair and unreasonable’ because all with–profits annuitants have been victims of maladministration.
‘Once bought, these annuities could not be exchanged, so every annuitant has suffered from the consequences of regulatory failure, irrespective of when they took them out,’ he says. ‘The decision is illogical and I'm appalled.’
Scawen also says the Treasury’s cut–off date ignores the views of Parliamentary Ombudsman Ann Abraham and Lord Chadwick, who in the past have both made recommendations on the extent of Government compensation.
He adds: ‘Even Chadwick, who came up with a much smaller overall compensation package than the £1.5 billion now on the table, said that pre–1992 with–profits annuitants should not be excluded. A review of this crass decision must be made urgently.’ ...
Paul Braithwaite of the Equitable Members Action Group says the Government's compensation package has turned into a lottery.
‘Some with-profits annuitants will do fine, others are questionable grounds, while 600,000 other victims of regulatory failure will barely get back 20 per cent of their losses,’ he says.
Mail on Sunday, by Jeff Prestridge 24 October 2010
Equitable Life pay–out of £1.5bn
Some 1.5 million policyholders with Equitable Life will receive a share of a total of £1.5bn in compensation, the chancellor has confirmed.
As expected, George Osborne said that the compensation payments would start in 2011.
Those who were hardest hit because they had already started taking their pensions through ‘with–profits’ annuities will benefit the most...
Campaigners said that compensation should be at about £5bn, but a later review by Sir John Chadwick — ordered by the last Labour government — said that the pay-out should only total about £340m. He said that the investors’ absolute loss was between £2.9bn and £3.7bn but their compensation should be capped for each policyholder at a fifth of that.
The chancellor rejected this view, but said the pay–out should be affordable.
‘I agree with the Ombudsman that the relative loss suffered is the difference between what policyholders actually received from their policies, and what they would have received elsewhere,’ Mr Osborne told the Commons...
The Treasury said that a group of 37,000 people would receive annual payments over their lifetime because they had faced the biggest upheaval. Those people — many of whom are aged over 75 — held with–profits annuities and so were already taking a pension. They were particularly vulnerable to reductions in the value of their policies because they were trapped by being unable to move their funds elsewhere. On average they lost £16,500 each, the Treasury said. The regular payments, totalling £620m and which will come from the £1.5bn pot, will effectively replace the money they have lost...
Mark Hoban said:
‘For other policyholders, we shall be providing a level of funding for the payment scheme that strikes a fair balance between the interests of policyholders and those of taxpayers in the current difficult financial circumstances.’
Paul Braithwaite, of the Equitable Members Action Group, said that the announcement by the government was ‘cynically’ timed and a disappointment. It could prompt a legal challenge from campaigners, he added.
‘We are shocked at the deplorably low level of the proposed payout. It effectively means that 600,000 serious pensions savers will have 75% cuts,’ he said.
He said the £620m was a ‘woeful underestimate’ of losses suffered by those with the with–profits annuities.
He was also unhappy that those who had bought one of these annuities before September 1992 would not be compensated. These people numbered an estimated 10,000, he said...
BBC website 20 October 2010
An enormous amount of new material has been published since 15th October, causing EMAG’s small secretariat severe overload. We are being inundated with calls, emails, media enquiries whilst we try to process and interpret the new material. Obviously, EMAG intends to put the key documents and editorial comment on this website. Meanwhile, please bear with us. It will be Friday before that will happen.
The situation is that the Coalition completely ignored the PASC select committee report published on 15 October.
37,000 lucky with–profits annuitants are reported as to receive 100% of their "relative losses", but only those who took out their pension out after September 1992 are included. Payments will be made annually to those lucky annuitants as long as they live, starting in Summer 2011. A small victory for EMAG, ELTA and supportive MPs. But thousands more pre–1992 Annuitants will get NOTHING.
However, something like 600,000 other policyholders who lost substantial money look like receiving less than a quarter of the Treasury’s calculated losses — which EMAG believes are understated by at least one billion pounds.
Those payments will be spread over three years, starting next summer. This disparity is certainly not the justice intended by the PO. Ministry cuts averaged only 19%. But the cut to compensation is greater than 75%. Grossly unfair and thousands of victims will be outraged.
To make the announcement in the Comprehensive Spending Review (CSR) was profoundly cynical of the Treasury — a Jo Moore day to bury bad news.
The independent Commission, who EMAG will see again on 29th October, has had its remit emaciated and will now have no involvement with the with–profits annuitants.
EMAG is exploring all options, including legal, and we will certainly be keeping the political pressure up and we encourage you to ask your MP to join the new all–party group and to apply pressure through the Committee stage of the compensation Bill.
MPs urge review of Equitable Life compensation report.
MPs are urging the Government to revisit a recent report on how much compensation should be paid to Equitable Life policyholders who lost money in the insurer’s near–collapse a decade ago.
The call came after Mark Hoban MP, financial secretary to the Treasury, yesterday told the Public Administration Select Committee that a distribution of losses showed that just over a quarter of policyholders suffered no loss at all and about 40pc lost between £1 and £1,000.
Next week’s Spending Review will reveal the size of compensation pool the Government is setting aside for Equitable policy–holders.
During the meeting yesterday, Mr Hoban came under fire as he was asked why he did not seek to change the terms of reference for the Chadwick Report into the payout back in May.
Published in July, Sir John Chadwick’s review indicated 1.5m policy holders had lost up to £4.8bn between them, but that compensation should be between £400m to £500m.
However, a 2008 report — based on different terms of reference — by Ann Abraham, the Parliamentary Ombudsman, suggested compensation should be between £4bn to £4.8bn. Activists for policy–holders are worried the payout could be closer to Sir John’s figure.
In a report due to be published today, the committee recommended the Government ‘re–engages Sir John to establish what conclusions he would reach under terms of reference which all reflect all 10 of the Ombudsman’s findings’. They added a review need not delay the payouts.
Mr Hoban told the meeting there were elements of Sir John’s report which enabled the process to progress. He added that revisiting the report would ‘delay justice for policyholders’. A Treasury spokesman said the committee report would be carefully considered.
Paul Braithwaite, general secretary of the Equitable Members Action Group, said he welcomed the review, but was ‘astonished’ that it would not be done by an independent commission that was set up to decide on how to pay compensation. He added the size of the payment ‘should not be rushed through and buried under the ministerial operational budgetary cuts’.
Daily Telegraph, by Rachel Cooper, 15 October 2010
"Dear Mark, Further to our meeting on the 7th September, we have had various exchanges of correspondence with Towers Watson and it is now appropriate for us to comment on their Stage 2 aggregate loss in the range £4.0bn - £4.8bn.
Transparency: We are sorry to report that there has been little transparency about the information provided to us. For example, Towers Watson claim to be incapable of estimating the percentage of the fund represented by with profits annuities or of estimating the 'relative loss' incurred by premiums paid between July 1991 and December 1992. The information provided in respect of with profits annuities has been entirely inadequate and they refuse to provide any information in respect of specific policies. In short, they refuse to do top-down estimates and won't provide comprehensive bottom-up calculations. When we met you on the 24th of May you assured us that the Coalition's commitment to the Parliamentary Ombudsman's recommendations and to transparency had been communicated to your Treasury officials and to Towers Watson. Our experience is that the message has not got through.
Timing: EMAG repeatedly requested access to Towers Watson's calculations of 'relative loss' from soon after your appointment in May. The tightness of the timing derives entirely from the long delay by the Treasury and Towers Watson in not providing any material information until September.
Assessment: Subject to the above lack of transparency and to the matters mentioned below, we do believe that the Towers Watson Stage 2 estimate has been properly prepared and can form the basis of an accurate assessment of 'relative loss' as recommended by the Parliamentary Ombudsman.
The issues where we believe adjustment is necessary are as follows:-
Start Date: The Parliamentary Ombudsman found that the start date for maladministration was July 1991, but for spurious reasons of his own Sir John Chadwick chose to delay this effectively to December 1992. This enabled him to duck the problem that full information is not available for that period. As a result, no attempt has been made to reconstruct this information. We believe such an attempt could be made and Towers Watson could certainly estimate the amount involved from the information which they have. In EMAG's view this would increase the aggregate 'relative loss' by about £700 million.
Work in Progress: Towers Watson in July gave you a range of between £4 & £4.8 billion. Our assessment is that they have calculated £4.8 billion as being the relevant loss up to 31 December 2007, but they believe that by incorporating data for the next 2 years they can reduce the aggregate by £800 million. While we believe there may be some reduction in the 'relative loss' applicable to those who were still invested in Equitable Life at December 2007, we cannot see it that could possibly amount to £800 million. In any event, it is time that Towers Watson finalised this estimate so that Ministers can make a decision based on a more reliable number.
Exit Costs: Over the years following the Society's closure, something in excess of 2/3rds of policy holders by value moved their money elsewhere. The vast majority of these did so to protect themselves from future losses and / or to escape Equitable Life, which was no longer capable of operating as a with profit office. Many of these suffered substantial exit costs, which should form part of their 'relative loss'. However, the methodology which Towers Watson has used assumes that anyone who left Equitable Life during that period upon a non contractual basis would also have left the comparator company on the same basis. Of course, if investment had been made in the comparator no such non-contractual exit would have been necessary. This has the effect of eliminating exit costs from the aggregate of 'relative loss'. They should be re-instated.
Policies in Existence Before the commencement of maladministration: Chadwick ducked this issue by calculating losses based upon his reconstructed version of Equitable Life. Since its results were, according to him, almost identical to the Society's actual performance, the effect is to value these losses at nil, or in some cases as profits. It is entirely possible to make an appropriate addition for such policies, but Towers Watson need to address it as a matter of urgency.
With-Profit Annuities: The information provided in respect of with profit annuities is entirely inadequate, but the result seems to produce losses which are proportionate to those suffered by other policy holders. This strikes us as very likely to be inadequate. In any event, we do not believe that it is appropriate, in circumstances where almost all the industry only offered conventional annuities, to use the Prudential and Scottish Widows with profit annuities as the comparator. In our view, the appropriate comparator for the vast majority of Equitable Life with profit annuities (average investment of about £47,000) is a conventional fixed annuity.
Conclusion: We are sorry to note that you did not act upon the request contained in our letter of 3rd September to 're-commission Towers Watson to recalculate 'relative loss' unfettered by Chadwick's template'.
In our view, the Towers Watson's Stage 2 estimate provides a sound starting point for the proper calculation of 'relative loss' as recommended by the Parliamentary Ombudsman and Towers Watson are capable of making the necessary estimates to correct the deficiencies referred to above and produce a reliable figure upon with Ministers could make a decision. There is just time for you to issue the necessary instructions so that they can do so."
Letter to minister Mark Hoban from EMAG director Colin Slater, 8 October 2010
"It is worth remembering a further aspect of the Ombudsman's recommendation which we should not lose sight of. In her report the Ombudsman said:
'that the public purse interest is a relevant consideration and that it is appropriate to consider the potential impact on the public purse of any payment of compensation in this case.'
She also noted that implementing her recommendations for a compensation scheme 'might entail opportunity costs elsewhere through the diversion of resources'.
Members will recognise that this is going to be an especially tight Spending Review across Government and public services and will therefore be keeping this recommendation from the Ombudsman recommendation in mind when considering the settlement of the Equitable Life issue.
Like you, I personally want to see a swift end to the plight of Equitable Life policyholders. I trust you will take comfort in the knowledge that I am doing all that I can to resolve the matter as quickly as possible."
Extract from letter from Mark Hoban MP, Financial Secretary to the Treasury, to MPs 28 September 2010
By way of a rebuttal, an EMAG member writes...
You tell us how Hoban reminds MPs of the PO's caveat that, 'the public purse is a relevant consideration'.
Hoban should also admit the fact that 'the public purse' has had the benefit of ten years interest-free use of the £5 billion that Gordon Brown MP (when Chancellor) estimated would be needed to save Equitable Life (in 2001). This amount is very close to the amount referred to by the PO as the possible total compensation to ELAS policyholders, but remains an amount so far unadmitted by Hoban and his ilk.
During those ten years, the Equitable's victims have subsidised 'the public purse', both by Governments determined to withhold compensation and so use the money for their own policies, and by the lack of any interest paid on that money. Quite what £5 billion in 2001 would be today, I can only speculate.
Now, when compensation is paid,
Surely, all of the above can justifiably be presented as a pre-emptive and enforced ten-year contribution towards cutting the deficit?
- its buying power will have been savagely reduced by ten years of inflation
- ELAS victims have been denied the opportunity to use or invest their money for growth and for their benefit
- living standards have been greatly diminished by the falling incomes (38% in my case)
- a very large number of victims have died and left their families in straitened circumstances
We all paid in advance. Regards, B**** ******* "
"Several honourable members have suggested today that the Equitable Life scandal - and a scandal it was - is complicated, but for me it is actually quite simple. It is about fairness to a group of people who were badly let down by the regulatory failures of their Government. I went into the recent general election supporting a Conservative manifesto that made a promise to Equitable Life policyholders in my constituency...
I wish to take this opportunity to assure policyholders in my constituency that I for one do not intend to go back on that election pledge. Most people accept that Equitable Life policyholders were the subject of Government maladministration, and that is certainly the view of the ombudsman, Ann Abraham. There is some dispute on all sides, however, about the level of compensation that should be paid to policyholders.
Sir John Chadwick's report established that the relative loss suffered by Equitable Life amounted to between £4 billion and £4.8 billion, and the Financial Secretary, in his statement to the House this July, supported that figure. However, Sir John then used a series of convoluted calculations and speculative assumptions that allowed him to suggest a cap on the total amount of compensation that should be paid. He then went on to reduce that cap figure to just 10% of the 'relative loss' figure that he himself originally calculated.
One of Sir John's most telling assumptions was that the majority of policyholders would have invested in Equitable Life irrespective of maladministration. That is a very big assumption that cannot be proved or disproved, but any rational person would consider such a lemming-like approach by investors as highly unlikely. I am simply not convinced by Sir John's arguments and I dismiss them out of hand, as do the Equitable Life policyholders in my constituency.
Like many members, I have been in touch with many of those policyholders, and all they want is fairness, because they are fair-minded people. However, they are not stupid people, and they recognise that in these times of austerity even they must shoulder some of the burden needed to bring down the country's massive debt mountain. To ask them to accept a reduction of 90% in their compensation, however, is not only unfair but, as has been mentioned by other Members, immoral.
In the current economic climate, however, it would be right and proper to ask Equitable Life policyholders to accept a cut in compensation in line with those being proposed for Whitehall Departments. If departmental budgets are cut by 20 or 25%, as we are being led to believe, I am willing to support a similar reduction in the assumed total of Equitable Life's relative loss, which would mean a compensation package of between £3.6 billion and £3.8 billion. If anything other than a formula based on a figure in that region is proposed, I will be forced to vote against the Government when the figure for compensation is debated."
Gordon Henderson, Conservative MP for Sittinbourne and Sheppey - in the Commons debate on the second reading of the Equitable Life Payments Bill, 14 September, 2010
Equitable Life's Chris Wiscarson furious over Treasury letters.
Chris Wiscarson, the chief executive of Equitable Life, has branded as 'outrageous' attempts by Mark Hoban, the Financial Secretary to the Treasury, and a roster of other Conservative MPs, to undermine the £4bn-£4.8bn compensation he believes the insurance company’s policyholders should be receiving.
Two days ahead of a parliamentary debate on the decade-long compensation scandal, Mr Wiscarson called on Mr Hoban to 'do the right thing' by giving Equitable’s thousands of out-of-pocket policy holders adequate compensation.
Ahead of the debate, Mr Wiscarson, in some of his most robust comments to date, told The Sunday Telegraph that politicians should stop 'making up' compensation amounts. A letter sent by Mr Hoban to a number of parliamentary colleagues makes no reference to the £4bn-£4.8bn figure that was first suggested by Ann Abraham, the Parliamentary Ombudsman, in July 2008.
The letter from Mr Hoban, a copy of which has been seen by this newspaper, does, however, make considerable reference to a report by Sir John Chadwick, who in July found that the amount of loss was in the region of £400m-£500m. Ms Abraham, has described Sir John’s report as 'unsafe and unsound'...
It can be revealed that the basis for these MP’s letters – many of which are remarkably similar — came from a series of draft documents produced by the Parliamentary Resource Unit (PRU). The PRU, based in the House of Commons, is a non-profit briefing and research service which supports 270 Conservative MPs. It is run by Iain Corby, who cleared the Equitable Life 'standard letter' memo sent to MPs in August 2010. On its own website, the PRU notes that the standard letters it produces 'incorporate the latest thinking of the member’s party on the issue. These positions are again sourced from the appropriate front-bench teams or party political sources, not within the Unit.' ...
Mr Wiscarson said:
'A policyholder reading this would be thinking this is the direction the Government are going in,' he said. MPs ought to have 'all the appropriate information' before them ahead of the debate this week and the Government should base its decision on the ₤£4bn-£4.8bn range. He added that Sir John Chadwick’s numbers 'have no place in this'...
Sunday Telegraph, by James Quinn 12 September, 2010
"MPs under fire in Equitable Life row.
Coalition MPs were last night accused of kow–towing to the Treasury after it emerged they have been sending carbon–copy letters to equitable life policyholders, fobbing off constituents who lost billions when the mutual insurer nearly collapsed a decade ago.
In a damning claim, Equitable Life chief executive Chris Wiscarson also accused the coalition government of implicitly supporting Sir John Chadwick's July report which recommended a meagre £400million–£500million payout to equitable policyholders.
'It is clear to me that MPs are being briefed to support the Chadwick report,' said Wiscarson.
Parliamentary Ombudsman Ann Abraham called the Chadwick report 'unsafe and unsound', and estimated a more reasonable payout should be based on losses of £4billion–£4.8billion. Yesterday, equitable life called on the Government to implement Abraham's recommendations in full.
Policyholders now fear that the coalition government, which came to power promising to adhere to the Parliamentary Ombudsman's recommendations, will offer a payout of as little as £400million.
Hundreds of letters sent to equitable policyholders by coalition MPs are very similar. Sometimes – as in the case of letters sent by Conservatives David Nuttall, MP for Bury North, and Mike Freer, MP for Finchley and Golders Green – they appear to follow a standard script. Their wording is almost identical.
'It appears that a standard template has been provided to MPs to send on to policyholders,' said Wiscarson.
On other occasions the script deviates slightly. But in every case, coalition MPs highlight the importance of the Chadwick report at the expense of the ombudsman's findings.
In a letter sent by Nuttall, the Bury MP states that a figure of £600million is 'support[ed]' by Equitable Members Action Group (EMAG), a pressure group set up to support policyholders.
EMAG spokesman Paul Braithwaite denied any connection with the figure and accused the Treasury of talking up the Chadwick report in an attempt to cut financial exposure to final compensation claims.
'The Treasury have been unbelievably devious,' said Braithwaite, accusing the coalition of reneging on pre–election promises after realising that compensation costs, in an era of supposed fiscal austerity, could rise to nearly £5billion. 'It is as if there hasn't been a change of government.' EMAG is set to make its case to financial secretary to the Treasury Mark Hoban today.
MPs will debate the Equitable Life (Payments) Bill next Tuesday in Parliament; a final compensation sum will be announced on October 20.
Daily Mail, Elliot Wilson 7 September 2010
"EMAG seeks support ahead of debate;
Equitable Life policyholders are being urged to lobby their MPs to back fairer compensation for victims of the failed insurer, ahead of a crucial House of Commons debate in September.
MPs will hear the second reading of the Equitable Life Payments Bill on 14 September and campaigners have expressed concern that the Treasury will ignore a letter from the Parliamentary Ombudsman in July which said the recommended compensation payments were 'unsafe' and 'unsound'.
Paul Braithwaite, spokesman for the Equitable Life Members Action Group, said:
'We are more than frustrated that whereas Sir John Chadwick was given an extension for his report, we have been asked through August, through a bank holiday, to make a submission to the Treasury on what we proposes as an alternative scheme. We will make a submission. We will be informing MPs in advance of the debate and encouraging them to participate.'
The House of Commons published a report on the history surrounding compensation payments for the collapse of Equitable Life ahead of a reading of the bill, which will provide the authority for a payments scheme for eligible former and current policyholders.
The 55-page document said:
'This paper outlines the commercial problems of Equitable Life, the series of investigations into the regulation of its activities and the work of the office of Sir John Chadwick in devising principles for designing a workable system of payments.'
Mr Braithwaite added:
'We are appalled that the Treasury is seemingly bent on toughing it out. The paper seems grounded in the Chadwick report and given the ombudsman’s view that Chadwick is unsound, this must be torn up.'
Sir John Chadwick's report, published in July, recommended that policyholders should receive £400m compensation. His conclusions were rebutted by Ann Abraham, parliamentary ombudsman.
She told MPs:
'It seems to me that those proposals, if acted upon, would not in any sense enable fair and transparent compensation to be delivered.'
Mark Hoban, financial secretary to the Treasury, has de-scribed the Chadwick report as 'just one of the building blocks in resolving what is a complex matter'. He is expected to set out the funding for compensation at the government’s spending review on 20 October.
The government has also set up an independent commission to advise on the best way to allocate payments to policyholders and help to develop the design of the scheme. It will report back by January 2011."
FinancialAdviser , by Marc Shoffman Aug 26, 2010
- "Dear Member,
Government compensation scheme for Equitable policyholders – your urgent response needed
At the end of last month, the Financial Secretary to the Treasury, Mark Hoban, announced in Parliament the long-awaited timetable for government compensation to Equitable Life policyholders as a result of the Parliamentary Ombudsman's findings of regulatory maladministration. The Minister also published Sir John Chadwick's report on a proposed Equitable Life payment scheme (as instructed by the former Labour Government) as well as preliminary estimates of potential policyholder losses. The estimate of loss based on Sir John's specific advice was just £400m to £500m. That works out at about £250 to £350 per policyholder.
The Parliamentary Ombudsman, who reported on the Equitable over two years ago and recommended a compensation scheme, wrote to MPs immediately after Mark Hoban's speech to say that Sir John Chadwick's advice was ‘an unsafe and unsound basis on which to proceed'.
The Board of the Equitable, on behalf of its policyholders, has long advocated compensation based on relative loss which the Parliamentary Ombudsman described in her report as ‘a loss that they would not have suffered had they saved or invested elsewhere'.
The Minister announced that relative loss is estimated to be in the range of £4bn to £4.8bn – around 10 times the compensation based on Sir John Chadwick's advice. The Minister has said that Sir John's advice is just one building block. But, the Parliamentary Ombudsman has said that Chadwick's approach ‘cannot provide a basis for the implementation of my recommendation'.
Compensation will be debated in Parliament on 14 September, and this will be followed by an announcement on 20 October of the total amount that the Government is going to pay out. So time is short.
Mark Hoban has invited representations to him following his speech and your Board will certainly be doing that. However, we think a fairer outcome is much more likely to happen if you add your personal voice directly to the Minister. All you need to do is write and say that you expect and deserve fair compensation as recommended by the Parliamentary Ombudsman and promised by the Coalition Government; and not a figure based on the Chadwick advice which the Ombudsman described as 'an unsafe and unsound basis on which to proceed'...
Chief Executive of Equitable Life"
"Dear Mr Cameron,
I was delighted when you were elected Prime Minister and had hoped that we could put behind us the dishonesty and spin which have characterised politics in this country for so many years.
Not so. As a member of EMAG I feel thoroughly let down. You, your senior colleagues and some 380 MPs including my own, signed the pledge which gave us hope that we would, after some ten years be justly treated. Instead the Treasury, whose incompetence has caused so much suffering for over one million Equitable Life pensioners, has been allowed to continue to dictate the terms of reference and base its assumptions on the discredited 'Chadwick Process'.
The Parliamentary Ombudsman has, quite rightly, vigorously condemned this chicanery. I ask you, as the country's senior minister, to fully support her and not allow us to be fobbed off with a pittance – one of the many consequences of which would be that younger people would be even less inclined to save for retirement.
Being realistic, I accept the financial difficulties facing us all and perhaps consideration could be given to compensation payments being made in stages, payable in say four or five years when the economy is on a sounder footing.
Whatever, Sir, please do not let us down; we have waited for justice long enough.
Cc: Nick Clegg, Danny Alexander and Mark Hoban"
"This is my first post as the daughter of two with-profits annuitants. I occasionally read this board (Motley Fool) and totally agree with Ann Berry's excellent posts amongst others. I note the comments about dormant Equitable Life policyholders. Many, like my parents, are too old, frail and ill to fight on.
Both my parents in their mid 80s have Alzheimer's, one at home and one about to go into a care home. I have been looking after them and could not contemplate attending a protest anywhere until now. However, I have just got a live-in carer for my father and with my mother in a care home, finally can give more attention to the fight.
As you can imagine their depleted savings are going on care costs, a dwindling annual pension and loss of my earnings by baling out too early from a full time well paid job to look after them.
The Coalition at first looked like a promising change. However, they have done nothing yet to look at the cost of elder care being distributed more fairly. It is just 'same old, same old' as Nu Labour and Gordon trying to stitch up the Equitable victims with the appalling Chadwick report. Cameron, Clegg and Cable have not matched their pre-election words with actions.
The saddest thing of all is to see my father slumped in his chair raising the Equitable debacle several times a day visibly upset on each occasion. It gnaws away at the very core of him with what limited ability he has to comprehend what goes on around him. The politicians and Treasury mandarins couldn't care less and are just trying to cobble together something which pays out the least they can get away with. My parents saved hard for their old age never expecting anything in return but decency and fairness. Instead, they have been thoroughly shafted at every turn!
When my father was still able to conduct a sensible conversation I drove him to our MP Damien Green at his surgery. People like me may not have contributed before on this board but we haven't necessarily been silent. The handling of the Equitable affair is an utter disgrace and I expect the Establishment are frightened of what else will be uncovered in the future with other institutions.
...I have already written many letters especially to Cameron as I hoped we would have a Conservative government rather than this Coalition. All I have ever received was the usual template rubbish letters from one of his researchers.
No wonder relatives of the Equitable's victims don't trust the pension or savings industry. Like the banks, corruption is rife at almost every level. So when next someone asks about the silent majority of Equitable victims, please consider that many cannot contribute effectively and so we as their offspring must take up the cudgels on their behalf!"
A new contributor, 'bestintentions', to the Motley Fool discussion board writes powerfully at post number 84019.
Equitable Life payout report 'is unsound'.
"A government-commissioned report that said victims of the Equitable Life scandal should receive compensation of just £266 each has been branded 'unsafe' and 'unsound' by the Parliamentary Ombudsman. The verdict yesterday by Ann Abraham has given fresh hope to the victims, who feared they would be left with a 'scandalously' low amount if the Coalition adopted the proposals.
Many of the victims of Equitable Life's near collapse lost most of their life savings. However, Sir John Chadwick's report, published last week, recommended that they receive just £400million compensation in total – about £266 per policyholder.
This was despite a report from a consultancy firm, published at the same time, which suggested losses sustained by policyholders were between £4billion and £4.8billion.
Ms Abraham wrote to all MPs yesterday saying the Chadwick report was an 'unsafe and unsound basis on which to proceed', and accused Sir John of 'explicitly rejecting' her help when deciding on the level of compensation that should be paid.
Equitable Life victims fear the Coalition will adopt the Chadwick Report despite assertions from the Treasury Minister Mark Hoban that the Conservatives would abide by Ms Abraham's own report in 2008, which found the Government guilty of maladministration and recommended a full compensation scheme.
Paul Braithwaite, head of the Equitable Members Action Group (EMAG), said the ombudsman's stance had 'vindicated EMAG's assertion that the Chadwick Report was a Treasury dirty trick to cheat Equitable Life policyholders'.
Ms Abraham said of the Chadwick Report: 'These proposals, if acted upon, would not in any sense enable fair and transparent compensation to be delivered.'
The Labour government agreed to set up a limited scheme that would compensate only those who had lost the most, and instructed Sir John to proceed on that basis. Mr Hoban said at the time that the Tories would accept the ombudsman's findings and pay out on that basis.
However, when he published the Chadwick Report last week, Mr Hoban said it would be an 'important building block' in deciding how much compensation victims would receive. He also indicated that the amount would be constrained by Britain's economic woes."
Daily Telegraph, by Rosie Murray-West - 27 July 2010
"Equitable Life victims warn of low pay-out.
Victims of the Equitable Life scandal will this month learn details of a long-awaited compensation package, but are warning that the coalition government will offer them only a fraction of what they are demanding.
Mark Hoban, Treasury minister, has promised to make an announcement in mid-July and has assured policyholders he will create a 'transparent, fair and independently designed' payment scheme.
But policyholders believe the eventual sum paid out will be about £1bn, far less than the £4bn-£5bn they have been demanding.
They had cheered the coalition agreement published in May because they believed it committed the new government to implement in full the 2008 recommendations of the parliamentary ombudsman, who calculated the multibillion pay-outs.
But now they are angry that Mr Hoban has kept faith with a review of their claims instigated by the last Labour government, under the chairmanship of Sir John Chadwick, a process they believe is discredited.
EMAG, the policyholders' action group, believes Sir John's terms of reference were over-complicated and were deliberately framed by Labour to minimise payments.
The group claims that continuing to rely on Sir John's work without any change to his terms of reference is likely to produce an actuarial fudge designed to understate the true scale of losses by as much as 80 per cent. 'His discredited terms of reference from the Labour government were heavily criticised by the parliamentary ombudsman who said that they would not deliver the justice she had called for,' said Paul Braithwaite, of EMAG.
'Instead of sidelining Sir John or updating his terms of reference to reflect their election promises, the coalition has allowed the process to continue with no change whatsoever. It looks as though, after 10 years of obstruction, the Treasury is still in control and determined to short-change victims.'
David Cameron has vowed to end the wait for compensation for policyholders. The prime minister has insisted the payments should not be means-tested and that descendants of deceased policyholders should be included.
Mr Hoban will announce this month that an independent commission will be set up to administer the pay-outs, which arise from the near collapse of the world's oldest insurer 10 years ago. A million people lost up to half of their life savings.
The government will publish Sir John's report – possibly next week – which will advise on issues such as relative loss suffered by policyholders and the impact of their losses.
Labour made little secret of its willingness to kick the Equitable case into the long grass."
Financial Times, George Parker 9th July, 2010
See this and other press coverage.
"Equitable Life group's last-ditch compensation bid.Equitable Life policyholders are making a last-ditch effort to win support from the coalition Government for an independent commission to award them compensation.
Equitable Members Action Group (EMAG), which claims support from 40,000 policyholders, is urging the Government to follow the recommendations of the parliamentary ombudsman (PO) for a commission, and to 'marginalise' the report of Sir John Chadwick due to be published next week.
Retired judge Chadwick was appointed by the last Government to adjudicate on making payments only to classes of policyholder who had been 'disproportionately affected', and was steered by the Treasury towards a complex discount mechanism which reduces the value of any payouts.
The Treasury had hinted that compensation would be limited to £1 billion rather than the £4.7bn implied by the PO's report.
Paul Braithwaite, general secretary of EMAG, said yesterday that 380 MPs had signed a pledge before the election to support 'proper compensation' from an independent scheme, while new Conservative Treasury minister Mark Hoban had said he was 'committed to implementing the Ombudsman's recommendations'.
Ann Abraham, the ombudsman, was highly critical of the last Government's response and its terms of reference for Chadwick.
Braithwaite has told EMAG members: 'The Treasury's intention, based on Sir John Chadwick's work, is likely to be a clever actuarial fudge which will seem to show that, even if Equitable Life had been properly regulated, compared with the worst performing pension life companies we have hardly lost much at all.'
He says it was 'outrageous' that Chadwick was allowed to proceed with unchanged terms of reference, which were 'entirely incompatible with the Po's recommendations and hence totally at odds with the coalition's promise and MPs' individual pledges'.
Braithwaite commented: 'Chadwick's report was conceived to both delay and to minimise payouts on what was essentially a charity hardship scheme, on the instructions of the Labour Government ... We want independent assessment of the losses that will form the basis of compensation, not just independent distribution of compensation.'
EMAG has been refused by the Treasury an explanation of the critical methodology used by actuaries Towers Watson to determine the relative performance of Equitable Life and other insurers in the 1990s."
The Herald, Simon Bain, 8 July, 2010
"Q: In the coalition agreement, the government said it would make fair and transparent payments to Equitable Life members. When is this likely to happen?
Steve Webb's answer:
I think the important thing to say about Equitable is the difference between the coalition's view on the ombudsman's report and the previous government's view is that the coalition accepts the thrust of what the ombudsman had to say.
I think the Ombudsman objected to the previous administration picking and choosing from her findings.
We said we accept the report, and now it's a question of looking at other spending commitments as well, what can be afforded for Equitable and then what is a fair way of allocating that pot. That’s the process that's going on now."
IFA Online, by Pensions Minister, Steve Webb MP, 1st July 2010
"The Government is committed to implementing the Ombudsman's recommendation to make fair and transparent payments to Equitable Life policyholders, through an independent payments scheme, for their relative loss as a consequence of regulatory failure.
We will be introducing a Bill in the first session of this parliament that will enable payments to be made and will be establishing an independent commission that will determine the design of the payments scheme. This is a sign of our commitment to deliver on the pledge we made in our Coalition Agreement."
Daily Telegraph, Mark Hoban (Financial Secretary to the Treasury) 26 June, 2010
"Play fair over Equitable. The new Government got off to a promising start with Equitable Life. Last month, it pledged to set up a 'transparent, fair and independently designed' compensation scheme for some of the 1.1 million policyholders who lost money when the mutual nearly collapsed in 2000. The statement appeared to reverse the previous government’s promise that only those 'disproportionately impacted' would receive anything. Hopes were stoked that up to £5 billion would be paid out in short order. An estimated 15 Equitable Life policyholders die every day, meaning that about 55,000 have gone to their graves without financial remedy since Equitable’s disaster.
The coalition promised to remove means-testing and allow descendants of deceased policyholders to claim.
But now the new Government appears to be back-peddling.
According to campaign groups such as EMAG, the main problem is the Treasury’s decision to wait for Sir John Chadwick, the retired judge who has been assessing customer losses at Equitable, to publish his final report next month before coming up with a final figure. To their fury, Sir John’s terms of reference, set up by the last government with the aim of paying only the most needy, have been left unchanged. EMAG fears this will cut compensation by as much as four fifths, to as little as £1 billion.
The Government must be fair on Equitable. It may be reasonable to argue that, with so little in the Treasury’s kitty, policyholders should take a haircut. Like the thousands in the public sector facing pay freezes and lost pension rights, Equitable’s customers should expect to share some pain. But a cut of 80 per cent is simply not fair. If Sir John really is working towards a £1 billion figure, he should rethink, or be ignored."
The Times, by David Wigton 18 June, 2010
"Equitable victims fear £4bn Treasury 'ambush'
Campaign fighting for victims of the Equitable Life scandal have rounded on the Coalition Government, warning that a "Treasury-inspired ambush" could cost policyholders almost £4bn.
The Equitable Members Action Group (EMAG), which represents policyholders who lost billions in the pension provider's near-collapse in 2000, said it believed the Government was planning a 'huge reduction' in the compensation offered to victims. The warning came after ministers failed to give reassurances over the calculations for the final amount due.
EMAG claims the losses incurred by the victims reached £4.67bn. This was the figure published in Parliamentary Ombudsman Ann Abraham’s report into the scandal in 2008.
However, the group claims the Treasury could lower the payment to £1bn by 'rebranding' the cheaper ex-gratia scheme proposed by the last administration. The Coalition had agreed to uphold proposals originally outlined by the Ombudsman, recommending substantial compensation for more than a million policyholders.
'Given the Treasury’s continuing refusal to make public the calculations of [the actuary] and the many unrealistic assumptions they have been briefed to make, our suspicion is that what they are doing is nothing better than a work of fiction designed to come up with the number the Treasury intended in the first place,' said Paul Braithwaite, a spokesman for EMAG.
'We are deeply disturbed by the gulf between the expectations raised by the Government’s promise and what appears to be going on at the Treasury.'
In a letter to MPs, EMAG added that Equitable victims should 'not be first in line to shoulder the whole burden' of Government cuts.
'If health, education, civil service pensions, local government salaries are to be subject to cuts, then one might expect us to shoulder part of the burden by accepting the same percentage cut as other spending commitments – but robbing 80pc from the compensation due to one million Equitable Life victims would be an outrage.'
The Treasury did not comment."
The Daily Telegraph Jamie Dunkley 16 June ‘10
“Nervous wait for Equitable campaigners. EXPECTATIONS have been raised of a multi-billion pound payout to more than a million Equitable Life victims, after the new government promised a "fair and transparent" settlement for all.
Campaigners have been fighting for a decade for £4.8 billion compensation to cover what they claim they lost, when the UK's most trusted insurance company collapsed. Both the Conservatives and Lib Dems supported their activities when in opposition and, as one of their first moves in office, promised money would be forthcoming.
But after initial euphoria, investors are becoming increasingly nervous about what precisely the coalition has in mind, and at the lack of detail accompanying the government's statement.
Treasury secretary Mark Hoban has guaranteed that a new bill will be forthcoming, establishing a scheme of compensation. He also pledged that payments would not be means tested, and the thousands who have died since the scandal broke, will not be shortchanged. Their estates will be credited with any redress due.
These two issues were major points of contention with the last government, which had set up a commission under Sir John Chadwick with a specific and tightly worded remit.
Now, however, some campaigners are concerned that investors' hopes may have been raised prematurely, given the caveats in a letter from Hoban, in which he also stresses "the impact of any scheme on the public purse must be taken into account". More worryingly, although the government has pledged to set up an independent commission, which will determine the design of the payment scheme, there are concerns it may all but rubber stamp the findings of Chadwick, who was appointed by the previous government.
His brief, at that time, was to concentrate on those who had been "disproportionately impacted". In other words compensation would be paid according to need, not justice.
Donald Scott, an East Scotland representative of the Equitable Members' Action Group (EMAG), said: "I am concerned, because I am not sure where we are going from here. The Parliamentary Ombudsman said we should be compensated according to rules drawn up by an independent commission. Chadwick was commissioned by the Treasury, so we don't see him as being independent at all. We felt he was discredited."……
Scotsman, Teresa Hunter, 6 June, 2010
"Equitable Life victims need justice. The coalition government has moved decisively to help Equitable Life policyholders waiting for justice, says financial secretary to the Treasury Mark Hoban...
Yesterday, the coalition Government took a major step towards ending that injustice. We were proud to announce the introduction of a Bill that will finally enable payments to be made to policyholders. We have also made a firm pledge to compensate dependants of deceased policyholders and that payments will not be means tested.
These two factors show our commitment to a swift, simple, transparent and fair payment scheme. The policyholders have waited long enough for justice. This coalition is built on the principles of freedom, fairness and responsibility. We recognise the Government's responsibility to tackle this issue and to do so in a way which is fair to both policyholders and taxpayers.
Our independent commission will determine the design of the payment scheme. While we appreciate the need to implement a payment scheme quickly, the impact and implications of events in relation to Equitable Life are complex, and it is important our approach is thorough, transparent and fair.
We believe this will give policyholders the confidence that they have got the best possible deal. But, as the Ombudsman accepted, we also recognise that the impact of any scheme on the public purse must be taken into account.
This issue means a lot to me. I have been working on it since 2005 and since coming to office I have had meetings with Sir John Chadwick, who was appointed by the previous government to advise on compensation, as well as Equitable Members' Action Group and Equitable Life.
The fact that we have announced within two weeks of being in power that we will introduce a Bill proves how serious this Government is about helping policyholders.
We are very aware of the distress among policyholders who have suffered loss, and the strong desire to achieve a solution quickly. While there will be frustration at the short delay to Sir John's report, it is important our approach is thorough and fair.
The Government is working hard to address the situation as quickly as possible, in order to ensure the establishment of an independent payment scheme that is fair to both taxpayers and policyholders."
Mark Hoban MP, financial secretary to the Treasury Daily Mail 25 May 2010
"Coalition Government: Equitable Life victims to get compensation
All victims of the Equitable Life scandal will now be handed compensation for the losses they suffered in a move campaigners hope will bring an end to a decade of 'denial and obstruction'.
The new coalition Government has agreed to uphold proposals originally outlined in a report into the insurer’s near-collapse in 2000 by Parliamentary Ombudsman Ann Abraham in 2008.
The report recommended substantial compensation for more than a million policyholders who lost pension savings when the company was forced to close to new business.
At the time, Ms Abraham’s damning report into Equitable Life found the Labour Government guilty of maladministration on 10 occasions but the Government said it would only offer limited compensation to victims.
However, in a statement yesterday, the new coalition Government said it would agree to implement the Ombudsman’s recommendation to make 'fair and transparent payments to Equitable Life policyholders, through an independent payment scheme'.
This upheld manifesto pledges made by both the Conservatives and Liberal Democrats.
The news was welcomed by campaigners who have lobbied for full compensation for victims.
Speaking yesterday, the Equitable Members Action Group, which represents 21,000 policyholders, said: 'We welcome the new Government’s commitment to implement the Ombudsman’s report in full. It’s been a long time coming.
'Sadly many thousands of Equitable pensioners have died without justice, sacrificed on the altar of Gordon Brown’s defence of 'light touch' regulation.'
The group said it will now work with the Government to help to ensure a 'swift' start to the process.
It added that it would also explore the possibility of policyholders receiving interim payments."
Daily Telegraph 13 May 2010
"More Equitable deal on offer for pensioners at the polls. If the polls are right and Gordon Brown leaves Downing Street, one million savers who trusted Britain’s oldest insurer can expect justice at last in the sorry saga of Equitable Life...
The pre-election pledges have been won by an eight-year campaign by the Equitable Members Action Group (EMAG), which has 23,000 members and an array of professional support. Along the way, EMAG has twice humiliated the government in the High Court, and won the support of the European Parliament, the Labour-led Public Administration Committee, a 150-strong standing group of MPs, and the parliamentary ombudsman Ann Abraham. But justice delayed is justice denied...,
When in 2008 Ms Abraham produced her blockbusting 2,800-page report, she found the government guilty of maladministration and injustice, and urged the immediate creation of an independent compensation tribunal which could complete pay-outs to one million policyholders by the end of 2010.
The government sat on the report for five months before publishing it, then waited another six before responding. Finally Treasury Secretary Yvette Cooper went to the Commons in January 2009.
...the minister had rejected the ombudsman’s key findings, as she appointed retired judge Sir John Chadwick to work under Treasury supervision on a low-budget scheme, which would make limited ex-gratia payouts to people who had suffered 'disproportionately'. EMAG estimated it might reach 10% of policyholders.
The Labour-led Public Administration Committee called the response 'shabby and unconstitutional'. More than 300 MPs signed an early day motion by Vince Cable calling for Mr Chadwick to resign. EMAG went back to the High Court, dug deep into its pockets again, and won a ruling forcing Mr Chadwick to widen his remit.
Last month, EMAG withdrew in frustration from the entire Chadwick process.
Mr Braithwaite says:
'It’s a Treasury stitch-up which seeks to negate four years of genuinely independent work by the parliamentary ombudsman... The government has treated us with contempt and brushed us aside time and time again. It is quite heartening that Lord Penrose, then the ombudsman, and now the court, have basically substantiated that these people have suffered an injustice and should be compensated.'
Read the extensive article detailing the time line in The Herald, Simon Bain 2 May 2010
- "Equitable Life losses cost hero his home.
RAF veteran Mark Mead was shot down by the Nazis and held as a PoW. Now aged 90, he is having to leave his beloved bungalow after losing his savings in Equitable Life...
...a month before his 90th birthday, Mark, and his wife Cynthia, are having to sell their beloved bungalow and move to a smaller property after seeing their retirement income plummet.
They are among tens of thousands of older people whose finances have suffered a severe blow after being caught up in the Equitable Life scandal – and who, with the government accused of dragging its heels on compensation, have not yet received a penny...
Over several years, Mark and Cynthia took out a number of Equitable Life products, including two with-profits annuities, which pay an income in retirement. With-profits annuity holders are regarded as the Equitable scandal's biggest losers. These policies were eventually transferred to Prudential, but the way they work means many people have seen their pensions cut by more than half, with the prospect of further falls...
...the family says that this year another Equitable Life investment providing them with an income of £2,000 a year in effect dried up. This appears to correspond to a pair of Equitable bonds which the company says were taken out 20 years ago, and are now worth £1,380. It was this that led the couple to conclude they would have to downsize.
Mark only has a state pension (he relates in his memoirs how, at the firm where he worked for many years, he 'saw several pension schemes initiated which then faltered, so I decided to make my own provision for retirement, and this I was able to do, on a modest scale, but without any contribution from the company')...
...having never claimed anything from the state, they are now getting pension credit and attendance allowance. Cynthia says she was reluctant because of the stigma in claiming benefits. Their council tax has also been reduced.
'It's unbelievable it should end like this,' says Cynthia, adding she feels sad because it's only in the last few years they have had to worry about money. She believes they, and many others, were victims of the 'mismanagement' of Equitable but, aside from that, says: 'I don't blame anyone particularly.' Asked how he feels about it all, Mark says: 'Thoroughly depressed.'..."
Read the whole sorry story at:
The Guardian, Rupert Jones, 17 April, 2010
"Watford MP Claire Ward has been accused of 'betraying' the thousands of constituents fighting for compensation after losing their pension funds.
Ms Ward agreed last month to sign up to an all party group of MPs supporting former investors in Equitable Life, many of whom saw their retirement plans ruined when the company came close to collapse in 2000.
However, angry campaigners have now accused her of reneging on her earlier promises and ''deceiving'' the estimated 9,000 victims in her constituency.
Stuart Pole, chairman of Equitable Members Action Group (EMAG) in Hertfordshire and Middlesex, said the Labour MP reneged on the pledge at the end of March, when she voted against House of Commons motion that, its Conservative and Liberal Democrat backers claimed, would have brought full compensation a step closer.
Mr Pole, of Radlett, said: 'We deeply regret Ms Ward's behaviour in this matter also now includes deceiving Watford constituents by undertaking to support them and then betraying them.'
Mr Pole also expressed frustration at Ms Ward’s lack of cooperation with the group on individual cases.
Liberal Democrat parliamentary candidate Sal Brinton, whose party supports full compensation, added: 'This motion would have been a major step forward. I am disappointed and outraged at her failure to support 9,000 constituents.'
A spokesman for Ms Ward, however, dismissed the claims as 'absolutely ridiculous and wrong,'...
Ministers, however, have only proposed ex gratia payments to those 'disproportionately affected' – a process that avoids the acceptance of blame and raises, EMAG claims, the possibility of means testing.
Labour’s chief secretary to the Treasury Liam Byrne, however, said in February that such a course of action was 'neither desirable nor administratively feasible'.
EMAG is demanding full compensation."
Watford Observer, Neil Skinner, 16 April 2010
Two triumphs for EMAG:
"We will make pensions and benefits fair and reward savers by: Meeting the government’s obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme."
Page 18 of the LibDem manifesto
"We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
Page 12 of the Conservative manifesto
"Fresh political battle looms over Equitable policyholders: Equitable Life policyholders believe a review into compensation due to be published shortly by retired judge Sir John Chadwick will be a whitewash following pressure from the government to delay and scale back their claims. The company's new management, led by chief executive Chris Wiscarson, is also understood to be 'deeply troubled' by the direction taken by the Treasury-commissioned review.
But the decade-long Equitable Life scandal is threatening to embarrass both leading political parties in the run-up to the election. The Conservatives have attempted to take the high ground by promising an independent body to determine compensation, but have floated a sum of £1bn instead of the £4-5bn estimated by the Equitable Members Action Group (EMAG).
Paul Weir, an EMAG spokesman, said Chadwick's third interim report was 'a cynical stitch-up designed by his Treasury masters.' The final version is due in May. He added that he welcomed the Conservative pledge to move quickly on redress but said: "'If the Tories undershoot on the amount it will backfire and fester on for years." Policyholder Les Crouch from Cardiff added: 'Good news, but a 25% payout? We must keep the pressure on.'
Vince Cable, the Lib Dem Treasury spokesman, has written to EMAG saying that the government's approach to compensation is 'flawed'...
Any payments to Equitable victims will be controversial at a time when the credit crunch has stretched the public purse. But Weir says: 'It is not our fault that there was profligacy by the banks. All we want is our own money back.'"
The Observer, Ruth Sunderland, 4 April 2010
“Following your meeting with Oliver Letwin and me, I can confirm that we support the EMAG pledge and we will encourage Conservative candidates to sign it.
Since the Ombudsman published her report in July 2008, we have made it clear that we accepted her recommendation that compensation should be paid as a consequence of maladministration.
We support her recommendation that this should be based on the relative loss suffered by policyholders and we believe that this should ensure that the payment scheme is simple, transparent and fair.
We also support the Ombudsman's view that it is appropriate to consider the impact of any scheme on the public purse. This will need to be borne in mind when we set the terms of reference of an independent scheme to implement her recommendations.
The design of this scheme will be determined independently of government with two exceptions:
- There should be no means testing; and
- Payments should be made to the dependants of deceased policyholders.
We would welcome EMAG's co-operation with the independent process to design and implement the compensation scheme.
It is time for the Equitable Life's policyholders to receive the justice they deserve. As David Cameron said recently, “If we win the election, we‘re going to sort out Equitable Life very early on”. We believe by endorsing EMAG's pledge and setting out this process we will deliver on that commitment.”
A letter, dated 2 April 2010, from Mark Hoban MP, Conservative Shadow Financial Secretary to the Treasury, to Paul Braithwaite and EMAG.
And a similar commitment letter from Vince Cable on behalf of the Liberal Democrats.
"Equitable Life reports increased policy values.
Equitable Life has predicted a 'real positive momentum' in the year ahead as it revealed an increase in assets for policyholders. In its preliminary results for the year ended 31 December 2009...
Ian Brimecome, chairman of Equitable Life, said despite a challenging 2009 the society had benefited from the completion of the contract with HCL to provide administration services from March next year which had added millions of pounds of value to policyholder funds...
Chris Wiscarson, chief executive of Equitable Life, said the society would continue to focus on maximising the return on policyholder assets subject to meeting solvency requirements; providing the best value for money cost base; and achieving maximum government compensation for policyholders.
He said: 'It is our intention to distribute all of the assets amongst with-profits policyholders as fairly as possible over time.'
Mr Wiscarson congratulated the Equitable Members Action Group (EMAG) on its success in getting the government to change the terms of reference of Sir John Chadwick's compensation proposals so that his advice on a compensation scheme will be more comprehensive than it might otherwise have been..."
FTAdviser, by: Catherine Couch 1 April, 2010
"Tuesday evening saw yet another debate on Equitable Life in the House of Commons. Despite several Labour MPs making speeches very hostile to the Government, with Barry Gardiner (Brent North) being the most forceful and eloquent, the Government motion was passed by 291 votes to 236 votes. Those are the hard facts and anyone who has followed the Equitable Life saga since the mid-1990s will be inclined to let out a sigh of despair and conclude that nothing much has changed and that the 1.5 million policyholders - average age now 79 - are still no nearer knowing what compensation, if any, they will receive. That would be an unduly pessimistic view…..
What the opposition team led by shadow Treasury spokesman Mark Hoban said was that they would hope that, if the Chadwick review is genuinely independent, it will come up with some proposals that are nearer to the original Ombudsman's report than so far supported by the Government.
Of course, there are severe doubts among policyholders that Chadwick is anything other than a Treasury stooge working to a brief to come up with the most limited, cheapest scheme he feels he can get away with. This view was forcefully articulated by the Equitable Members' Action Group in the wake of the publication of Sir John's third report a couple of weeks ago...
There was a concerted push by the Liberal Democrats to extract a commitment to make interim payments to policyholders but this didn't win enthusiastic support from the Tories and was ruled out by the Government.
The conclusion I have come to on reading through the debate in Hansard a few times is that there is now very little difference in the position of Labour and Conservative front benches, although the Tories hint at a more generous settlement should Chadwick fall short of their hope that he will recommend a scheme similar to that envisaged by the Ombudsman last year. Attempts by Government ministers to get the Tories to be specific on this commitment forced Mark Hoban onto the defensive with the plea
'We do not know what the bill will be'.
He almost sounded for a moment as he was practicing for when he might be a minister himself. One thing I have learnt to refrain from referring to any twist or turn in this sorry tale as the 'final chapter' again."
David Worsfold, IFA Online 18 March 2010
EMAG had concerns about the debate with regard to 'The Chadwick Process' and wrote a letter to EVERY MP immediately.
- "The action group representing Equitable Life policyholders accused the Treasury of a 'stitch-up' last night.
Equitable Members’ Action Group (EMAG), which represents 25,000 policyholders, some of whom lost their life savings during the society’s near-collapse a decade ago, has withdrawn its support for a Treasury-commissioned review into compensation payments.
Instead of co-operating with Sir John Chadwick, who was commissioned in January last year to explore payments for policyholders 'disproportionately' hit by Equitable’s financial troubles, the group said that it would campaign for a full compensation fund to be established...
Paul Braithwaite, general secretary of the Equitable Members’ Action Group, told The Times last night that Sir John’s review, the conclusions of which are due in May, was a Treasury 'sham' that was being controlled by civil servants.
Mr Braithwaite said that the Treasury was using the review to 'retry the case' of Equitable and attempt to deny any obligations to make good policyholders’ losses.
Rather than the billions that they were due, policyholders were likely to end up with 'only several hundred millions', he said. The action group’s campaign will focus on existing and prospective MPs, many of whom have numerous constituents who hold worthless Equitable policies, he said.
The Treasury said it regretted the group’s decision and that it had taken account of its submissions. A spokesman said it was commited to a 'fair resolution for policyholders."
The Times, by Miles Costello 16 March 2010
See EMAG’s press release
"Savers warned about high price of leaving Equitable Life. People who transfer pensions out of the beleaguered insurer Equitable Life don't know the true cost of doing so, a whistle-blower claims... But Britain's oldest insurance company – which was forced to stop selling new policies 10 years ago when the House of Lords ruled against it – says it treats all its customers fairly...
...a source close to the company claims that people younger than 60 – the minimum age at which Equitable allows pension plan-holders to take benefits without any exit penalty – are not told the full difference between what they can obtain as a transfer value and the maturity value they would receive if they waited until they were 60...
'So, people who have asked for transfer values since then are told about a 5pc market value adjustment (MVA) but not about the 16pc reduction..
Equitable Life spokesman Alistair Dunbar said: 'It is the words that are the problem here – not the meaning. The difference between the surrender value and the contractual value is something that we are completely open about. I am not saying that the person who has made these allegations is not genuine...
'The problem affects clients who are not old enough to achieve the full value of their policy. For example, if you call Equitable Life for a value of your policy and have not reached the minimum contractual age, you will only be given a 'transfer value' and not a full maturity value. The official reasoning is that any activity on the policy – for example, moving to another provider – is breaking the contract and therefore the full maturity value is not applicable and not given...
Paul Braithwaite of the Equitable Members' Action Group added: 'These appear to be very serious revelations which we hope and expect the new chief executive of Equitable Life, Chris Wiscarson, will investigate thoroughly.'
A spokesman for the Financial Services Authority said it could not comment on its supervisory role in relation to any individual company, but it is determined to ensure that all regulated firms treat their customers fairly."
Saturday Telegraph, Ian Cowie 6 March, 2010
"Honor Blackman battling for the Equitable pensioners
Liam Byrne had better watch out. The 'forces of hell', which his Darling boss at the Treasury had to contend with, may seem like summer breezes compared to the Fury sitting opposite me in a Notting Hill café, plotting revenge. 'It would be quite something to hit the Treasury minister about,' says his nemesis, waving scarlet finger-nails and flashing a singularly steely pair of ice blue eyes...
Blackman is 'mad as hell' about the decade of government prevarication regarding a settlement for the thousands who have been left all but destitute in their last years. 'It sounds like we are asking for charity,' she fumes, 'when we were deliberately defrauded by being sold policies which Equitable knew they couldn't honour.' Why else would she make the supreme sacrifice of being photographed holding onto a giant cardboard cheque for £5,000 addressed to a notional Equitable Life sufferer? ...
Blackman is the most prominent, and glamorous, of the 44,000 Equitable Life annuitants – average age 79 – who have yet to receive any compensation for the mismanagement of their funds. It is 10 years now since the insurer slashed payments, having run deep into debt by promising more than it could deliver...
'These are people the Government should think are wonderful,' she says. 'We were responsible, prudent, we provided for our retirement so that we wouldn't be a burden on the state or our families. These people are having to sell their houses and live on benefits. But they ignore us. Yet if you gambled with your money, and put it in Iceland, you were promptly reimbursed.'
This Wednesday she attended a meeting at the House of Commons, along with 93 MPs, including the Lib Dem Vince Cable, a long-time critic of the Government's 'shameful' handling of Equitable. There Byrne and Chadwick promised action within two weeks of the latest report being published in May – just when a general election is expected.
'I think they hope they won't have to deal with this. But someone will bring justice...
One reason why Equitable Life pensioners may have been left to rot is the misconception that they are rich people who can afford to take the knock. But, she points out, the typical value of their annunity pots is £47,000 from which individual pensioners have been receiving only £2,200 a year, half what they were promised...
She seems to be relishing the action and attention so much that I wonder whether other Avengers will also turn vengeful. Perhaps Diana Rigg will battle for the angry patients of Stafford hospital? 'I doubt it. Diana has distanced herself from the Avengers. But I am happy to man the guns for EMAG, any time'."
Daily Telegraph, by Cassandra Jardine 26 Feb
Equitable Life victims will get back just one QUARTER of their loss.
Victims of the Equitable Life scandal were told yesterday that they will get compensation worth less than 25 per cent of their loss.
More than half of those caught up in one of Britain's biggest financial debacles will receive a payout of less than £250.
In a further blow, they will have to wait six months more before the first payments begin to be sent out, with many not arriving for several years. Around 15 policyholders die every day.
Unlike Labour, which critics say dragged its heels over compensation, the Coalition promised within months of coming to power that £1.5billion would be paid to the victims and the relatives of those who died waiting for compensation...
Yesterday the Government published the Independent Commission's report into how compensation should be paid. Its recommendations relate to £775 million of the total compensation pot of £1.5billion, and cover around one million policyholders.
Around 100,000 policyholders will not get a penny because they lost less than £10, which would be of ‘negligible significance’ to them and expensive to administer, the commission said.
A table, buried on page 107 of the commission's report, says around 530,000 of the remaining victims — 56 per cent of them — will get between £10 and £250, under its recommendations...Policyholders will receive a payment equal to 22.4 per cent of their ‘relative loss’.
This ‘relative loss’ is the difference between the returns they got from Equitable, and the amount they would have received if they had invested their money with a rival.
The Government has previously announced that the rest of the £1.5billion compensation fund will go to 37,000 pensioners who cashed in their pension pot with Equitable, buying a with-profits annuity. They will be compensated in full.
The first payments, which will be made this summer, will go to the oldest policyholders and the estates of those who died during the wait. The commission said 95 per cent of all policyholders over the age of 75 should get their money by the middle of 2012.
Mark Hoban, Financial Secretary to the Treasury, said he welcomed the commission's recommendations, adding: ‘We will use them as the basis for making payments to policyholders.’
But Paul Weir, 58, a director of the Equitable Life Action Group, who lost £50,000, said: ‘We are fighting on to get the rest of the money. We are digging in for a long campaign.’
The Government estimates the total loss was £4.3billion, but Mr Weir says the real loss figure is closer to £6billion.
Daily Mail, by Becky Barrow. 27 January, 2011
"Equitable Life savers get callous treatment
The Government seems determined to leave the Equitable Life debacle to be cleared up by its successor. The Government’s regulatory incompetence in the Equitable Life debacle has now given way to callous cynicism, It is 19 months since Ann Abraham, the Parliamentary Ombudsman, identified 10 instances of maladministration between 1991 and 2001 ...
Why the tardiness? Could it have anything to do with the fact that the claimants whose need is the most pressing – those on devalued annuities – have an average age of 79? As David Cameron has pointed out, the Government is simply waiting for them to die...
Mr Cameron has described this strategy as 'sick', and he is right. Miss Cooper and her successor, Liam Byrne, have behaved shamefully. Last October, Mr Byrne was asked in the Commons when payments would start. His reply? 'That, I know, is the million-dollar question, which I cannot answer this afternoon.' It is worth contrasting this with the compensation awarded to miners a decade ago for illnesses incurred in the pits, when 90,000 claims worth more than £4 billion were settled in short order. But then, the victims of the Equitable Life collapse are not natural Labour supporters.
At a protest meeting yesterday, the actress Honor Blackman, an indefatigable campaigner on the issue, called for interim payments to be made to the 44,000 most elderly victims, ahead of Sir John’s full report. If the Government had any sense of decency, it would accept the proposal – though we fear it is determined to leave the mess to be cleared up by its successor."
Leader Column in the Daily Telegraph, 19 Feb
Best of media : Coverage of Honor Blackman fronts EMAG’s call for interim payments to WPAs
EMAG’s press release explaining the proposed payment on account for locked in annuitants.
"David Cameron: Labour 'waiting for Equitable Life victims to die'
David Cameron has accused Labour ministers of waiting for Equitable Life victims to die in order to avoid paying them proper compensation.
The Tory leader attacked Labour's 'sick' approach to Equitable Life as policyholders in the collapsed company grow increasingly angry about delays in compensation payments promised by ministers. More than a million customers lost up to 50 per cent of their pensions and savings when Equitable came close to collapse in 2000, opening one of the largest financial scandals in British history.
Ann Abraham, the Parliamentary Ombudsman, in July 2008 ruled that the collapse of Equitable Life followed a 'decade of regulatory failure' by ministers and officials.
The inquiry said that the public had been misled and that the Government should apologise and pay compensation to policyholders of the insurer.
After years of refusal, the Government last January promised ex-gratia payments to people who had been 'disproportionately affected' as 'swiftly as possible'. No such payments have yet been made.
The Equitable Members Action Group estimates that more than 40,000 policyholders have died since the company closed its books to new business. The group says that 15 more policyholders die every day.
In a 'Cameron Direct' meeting with voters in Romsey, Mr Cameron promised that a Tory government would resolve the issue quickly, and attacked Labour over its delays.
Cameron said: 'The Government has put it off and put it off and in a very sick way, I think, they’re waiting for people to die.'
He added: 'If we win the election, we’re going to sort out Equitable Life very early on.'
There is wide support in the House of Commons for the Equitable victims, and last year, more than 350 MPs of all parties signed a Commons motion calling for full Government compensation.
That could cost as much as £4.5 billion, and Mr Cameron stopped short of saying exactly how he would 'sort out' Equitable Life in power.
Yvette Cooper, then the Chief Secretary to the Treasury, told the House of Commons last January that the Government accepted that policyholders had suffered 'injustice'. She promised that ex-gratia payments would be made to people who had been 'disproportionately affected' as 'swiftly as possible'.
The Treasury then asked Sir John Chadwick, a retired judge, to review the impact of the firm's collapse on its policyholders. Those he identifies as most deserving will get 'ex gratia' payments from the Government.
However, Equitable campaigners say they are increasingly exasperated with the time Sir John is taking. He is not expected to produce his final report or any details of a possible repayment scheme until after the general election in the spring.
Paul Weir from the Equitable Members Action Group said: 'The Treasury is taking as long as possible to do very little. While the Government sits on his hands, the increasingly aged victims of this scandal are dying off in greater and greater numbers – no doubt exactly what the Treasury is hoping.' "
Daily Telegraph, by James Kirkup, 17 Feb ‘10
"MP Claire Ward has clashed with a campaign group whose members lost up to 50 per cent of their pensions in the near collapse of Equitable Life.
Campaigners from the Equitable Members’ Action Group (EMAG) Hertfordshire and Middlesex Branch are fighting to recoup the losses incurred by thousands of local pensioners after the failure of the company in 2000. They argue that clear regulatory failings – highlighted by the High Court – mean the Government should compensate all savers who lost money in the company. Ministers, however, have so far resisted blanket repayments and are currently awaiting the findings of a Treasury-sponsored review before any compensation scheme is agreed.
Stuart Pole, chairman of EAG Hertfordshire and Middlesex, however, argues that any such scheme is likely to involve an element of means testing and would still leave savers out of pocket. Repeated attempts to lobby Ms Ward’s support, he added, had proved unsuccessful, with requests for answers often ignored. He said: 'We work with seven MPs and Claire Ward has given us the least support of all. She has not lifted a finger to help us. This is bizarre because we are an electoral force.'
But Ms Ward defended her record on the matter. She said: 'I am very sympathetic to the situation that Equitable Life policyholders find themselves in and fully understand why they are concerned.'..."
Watford Observer, Neil Skinner, 2nd February, 2010
"Equitable Members’ Action Group accuses Government of delaying tactics: The Government has ensured that no compensation will be paid to Equitable Life victims until well into the next parliament, nine years after the scandal broke, and is 'preoccupied with finding new ways to reduce the value of payouts' from the scheme it set up.
The claim, from the 23,000-strong Equitable Members’ Action Group, which has twice won legal victories over the government in the High Court, came yesterday on the first anniversary of the government finally agreeing to set up a restricted payment scheme for compensation...
EMAG says the Treasury has slowed progress by insisting that the scheme should apply seven complex 'discounts' to the assessment of policyholder losses. They include a discount for the failures of Equitable's management, for the failures of the auditors Ernst and Young, for the responsibility of the investor, for the probability that some pensioners would still have invested even without the maladministration of the regulators, and for any excessive bonuses declared before 1991.
Additionally, EMAG claims that the proposed use of a 'weighted' basket of comparative pension products provides ample scope for 'financial conjuring' to reduce the bill still further. Already Chadwick has been told by the Treasury to make payments only to those who are 'disproportionately affected' – a term which remains undefined.
Braithwaite said: 'EMAG will campaign for the next government to hand Sir John's work on calculating true losses over to an independent body to administer compensation, rather than the fudged, minimal, ex-gratia scheme currently planned by the Treasury - the department that was found guilty of regulatory failure in the first place,' said Braithwaite.
The group is planning to target candidates of all three main parties in more than 550 constituencies in the run-up to the election to seek their support. It already advises parliamentary group Justice for Equitable Sufferers, which has 150 MP members...
In a recent interim update, Chadwick reported correspondence from the Treasury in which he is encouraged to adopt the most narrow legalistic interpretation possible of the ombudsman’s findings, rather than his preferred 'flexible' and common-sense approach to injustice. The Treasury, he said, 'did not consider the flexible approach to be consistent with the wording of the specific findings in the Ombudsman's report'. Chadwick, however, concluded: 'I am satisfied that I am permitted to adopt the flexible approach. That is what I propose to do.'
EMAG has questioned Chadwick's independence. A Treasury spokesman commented: 'The Treasury has put in place arrangements to ensure there is no conflict of interest.'..."
Simon Biain, The Herald 16 January, 2010
"Equitable Life victims criticise government over delays.
Policyholders at Equitable Life today accused the Government of dragging its feet a year after it promised to make speedy payments to people hit by the problems at the society.
On January 15 2009, the then Treasury Chief Secretary Yvette Cooper told the House of Commons the Government would make ex-gratia payments to people who had been 'disproportionately affected' as 'swiftly as possible'.
She also appointed former Appeal Court judge Sir John Chadwick to examine cases to decide what ex-gratia payments should be made. But a year later, policyholders still do not know when they will be paid or how much they will receive.
Paul Braithwaite, general secretary of Equitable Members Action Group (EMAG), said: 'A year on and Yvette Cooper's promises of speed, parroted at regular intervals subsequently by (her successor) Liam Byrne, have been shown to be hollow and cynical.
'While 15 victims of this scandal die every day, the Government has ensured that Sir John will not even make his recommendations until after the election.''
The agreement to pay redress came after Parliamentary Ombudsman Ann Abraham called on the Government to set up an independent tribunal to calculate compensation for policyholders after finding 10 instances of maladministration by regulators and Whitehall officials in relation to Equitable in the period leading up to December 2001.
The Government rejected some of her findings of maladministration, but EMAG later won a High Court victory when it was ruled that the Treasury had been wrong to reject certain specific findings by the Parliamentary Ombudsman.
A Treasury spokesman said: 'The Government has agreed to set up a payment scheme that is practical and fair to both policyholders and taxpayers, and which can pay out as swiftly as possible.
'Sir John Chadwick has been appointed to advise on the fairest way to proceed. He published his interim report last month and is continuing the detailed analysis of policyholder records that will inform his findings.' "
Daily Telegraph, 15 Jan 2010
"Equitable reverses policy cuts and ends bonus famine. Equitable Life has reintroduced interim bonuses for the first time since the credit crunch.
In a rare piece of good news for policyholders, Equitable, the mutual group that nearly collapsed ten years ago, will reverse cuts made to policy values last March when stock market valuations were at rock bottom.
Equitable said yesterday that customers holding UK with-profits pension plans will receive a one-off rise of 2 per cent to their policies, as well as an interim bonus of 3.5 per cent...
Chris Wiscarson, chief executive of Equitable, said yesterday: 'The society is determined to recreate value for policyholders, and these increases in policy values are small but important steps along this road.'
The mutual cut the value of its with-profits pension and life policies by 2 and 1.6 per cent, respectively, last March, blaming 'challenging economic conditions'. However, improvements in the economy and a money-saving outsourcing deal with HCL, a pensions administrator that now runs Equitable's funds, have allowed the insurer to increase its valuations. It said yesterday that the HCL deal alone had saved it £100 million...
Policyholders recently won a High Court victory when it was ruled that the Treasury had been wrong to reject findings by Ann Abraham, the Parliamentary Ombudsman, after a challenge brought by the Equitable Members' Action Group...
The Accountancy & Actuarial Discipline Board (AADB), a division of the Financial Reporting Council, announced last October that it had opened its own investigation into the conduct of an individual actuary who was involved in the auditing of Equitable's financial statements from 1997 to 1999.
John Newman, the chairman of the Equitable Members' Action Group, said at the time that the AADB's investigation was akin to 'shutting the door after the horse has bolted'."
Helen Power, The Times January 5, 2010