Equitable Life redress ruling ‘unfair’
The Government's decision not to compensate Equitable Life members who annuitised before 1992 was unfair and wrong, according to and Pensions select committee member Andrew Bingham.
In June, the Government began distributing £1.5bn of compensation to those who annuitised after 1992. It chose the cut-off date because before then there was no maladministration in the firm which, if spotted by the regulator, could have affected policyholders' investment decisions.
But speaking to Money Marketing at the Conservative Party conference last week, High Peak MP Bingham said the 10,000 people who annuitised before the cut-off date should have been included.
He said: ‘When the vote came through the House of Commons I voted against the Government because I thought the pre–1992 annuitants should have been entitled to compensation. There were a few of us who thought the same, but not enough.
‘Even though their losses were not the result of regulatory failure, I think it was unfair and wrong to exclude them. A lot of Equitable Life policyholders feel the Government's solution is not as they would wish.’
Under the compensation scheme, £620m will go to 37,000 with–profits investors compensating them for relative losses. Two–thirds of the money is expected to be paid out by 2015.
Money Marketing, by Steve Tolley 13 Oct 2011
‘Unfair’ Equitable compensation scheme under pressure
The Government is under renewed pressure to review its controversial decision to exclude more than 10,000 Equitable Life customers from a £1.5 billion compensation scheme it launched earlier this year.
It follows publication of an independent report by an eminent actuary for pressure group Equitable Members Action Group (EMAG) that says their exclusion is both unfair and unjustified.
The report, written by David Forfar, a fellow of the Faculty of Actuaries and former appointed actuary for Scottish Widows, looks into the treatment of Equitable Life customers who hold with-profits annuities with the mutual.
When the Government drew up details of the compensation scheme, it decided to divide the 47,000 annuitants into two camps.
The 37,000 who took out their policies from September 1992 onwards were promised full compensation to cover their losses resulting from the failure of regulators and past governments to monitor effectively the mutual.
Not being able by law to transfer their annuities, these customers, says the Government, suffered savage cuts in their income after Equitable took action to avoid bankruptcy.
But earlier annuitants were offered no compensation as they had already benefited from unusually high income payments as a result of the mutual's willingness to pay large bonuses to attract new business. These overpayments, the Government argued, more than made up for subsequent losses.
Forfar concludes that it is ‘unfair’ to compensate just one group of annuitants and says the over-bonuses were ‘insignificant’.
On Friday, EMAG's Paul Weir said the Government should offer compensation to the 10,000 annuitants — many in their 80s — before ‘it is too late’...
The Treasury declined to comment.
Mail on Sunday, by Jeff Prestridge 25 September, '11
Fury as only 321 Equitable policyholders are paid
More of its oldest policyholders could die before they received payments, the Equitable Members' Action Group said Equitable Life campaigners renewed their attack on the Government's compensation scheme yesterday as it emerged that only a fraction of eligible policyholders had received payments.
The Treasury has pledged to pay out £1.5 billion in compensation to about one million Equitable policyholders, who saw the value of their savings fall by as much as 60 per cent when the mutual almost collapsed more than a decade ago. After a concerted campaign by action groups, the Treasury has agreed to pay out £500 million of this by next April and to contact all eligible customers by June. The average payout for policyholders is expected to be between £800 and £1,000.
But it has emerged after a freedom of information request that, as at the start of this month, only 321 payments had been made from the scheme.
The Equitable Members' Action Group, which has been fighting for more than a decade for policyholder recompense, said it feared that the Treasury was stalling. More of Equitable's oldest policyholders could die before they received payments, EMAG said. The group has dismissed the size of the payouts — worth slightly more than a fifth of customers' losses — as derisory.
Paul Weir, the EMAG spokesman, said: ‘They're going to have to ramp things up spectacularly to turn an annual rate of 3,700 into one million.’;
Paul Braithwaite, the general secretary of EMAG, said that the group, which has more than 40,000 members, had been contacted by many anxious policyholders wondering why they had heard nothing.
‘EMAG is having to be the frontline service because the Treasury has created a vacuum by not communicating anything to the million policyholders acknowledged as being eligible for compensation,’ he said.
A spokesman for the Treasury said that it was deliberately starting slowly to ensure that its complex payment mechanism worked properly and that payments would speed up soon.
The Times, by Miles Costello 18 August, 2011
Equitable saga ends, but the shame lives on
After more than a decade of demonstrating outside Parliament, lobbying MPs, pressing Governments (past and present) and taking their case to Europe, some Equitable Life policyholders actually began to receive compensation last week.
This follows a commitment by the Government to pay out £1.5 billion over the next three years to victims of the debacle that saw the mutual insurer totter to the verge of extinction in 2000 and policyholders' investment plans subsequently ravaged to rescue it from bankruptcy.
The Government should be applauded for recognising the financial discrimination that many Equitable customers have suffered because of the failure of regulators to keep an eagle eye on the insurer during the Eighties and Nineties.
But let's not kid ourselves that this is a happy end to one of the most shameful episodes in the financial services industry over the past decade — because it clearly is not. For a start, the compensation being paid is a fraction (one-fifth) of what stalwart campaign groups such as Equitable Members' Action Group claim is due.
Indeed, EMAG, guided by the magnificent Paul Braithwaite, will continue to campaign for a bigger compensation package. I would not expect anything else from Braithwaite and his team, but I expect they will be flogging a dead horse given the straitened times in which we live.
Second, the Government has excluded from compensation about 10,000 (pre-September 1992) with-profits annuitants on what can only be described as spurious financial grounds.
Mark Hoban, Financial Secretary to the Treasury and mastermind of the compensation scheme, should review this decision as a matter of urgency because it is clearly wrong.
But worst of all, what is most damning about this whole affair is that more than 50,000 Equitable Life policyholders have died while vainly waiting for compensation to come their way.
Parliament and Gordon Brown in particular (the former Prime Minister, more than anyone else, prevaricated on the issue of compensation) should hang their heads in shame.
Mail on Sunday, Jeff Prestridge. 3 July 2011
Equitable Life: An object lesson in how to fail at financial regulation
This will not be the end of the campaign for justice by Equitable savers — and we should not pretend that they have had anything but a raw deal.
Everyone will welcome the promises made this week by those who will run the new Financial Conduct Authority, which replaces the Financial Services Authority next year. It swears it will not repeat the mistakes made by its predecessor over the past decade and beyond.
Let us hope that proves to be the case — for as we are reminded today, the legacy of financial scandals can be enduring. The good news is that 11 years after the collapse of Equitable Life, the Government is finally going to start doing the right thing by the tens of thousands of affected savers. It would be churlish to note that ministers have cut it very fine on their commitment to dispatch the first compensation cheques to victims of the Equitable scandal by the end of June — at least those cheques, going in the post today, have finally been signed.
However, this will not be the end of the campaign for justice by Equitable savers, and we should not pretend they have had anything but a raw deal — certainly collectively and, in the vast majority of cases, individually too.
It was a surprise to many that last year's Coalition agreement explicitly recognised the repeated rulings by the Parliamentary Ombudsman that Equitable savers were let down by the regulatory system.
That the agreement's commitment to compensate the losers in full was subsequently reneged upon was more predictable. The failings in this package are numerous. Despite their long wait, savers will get their money back in dribs and drabs over the next three years, rather than upfront. Inevitably, that means yet more Equitable victims will die before having received the compensation they are owed.
Then there is the fact that thousands of Equitable savers are missing out altogether on redress. The terms of the pay-out exclude policyholders who did not begin saving during a narrow period of time: that will cost at least 10,000 victims of the scandal.
Even those who are being compensated will be disappointed with the cheques they receive. To put it politely, not many people agree with the formula for calculating losses that ministers drew up.
The best we can say about today's pay-outs is that this shoddy episode is finally drawing to a close. The disastrous, long-term results of a basic failure in regulatory practice should be studied by everyone now preparing for the next era of consumer protection in the financial services industry.
Independent, David Prosser 30 June, 2011
Equitable Life compensation fight goes on for thousands
MPs will maintain pressure on the Government to include 10,000 Equitable Life policyholders who were left out of its £1.5 billion compensation package.
Fabian Hamilton, Labour MP for Leeds North East and joint chairman of the all-party Parliamentary group Justice for Equitable Life Policyholders, has promised to take up the fight on behalf of the 10,000 customers who took out with-profits annuities before September 1992.
He believes they have been unfairly excluded on the basis of ‘selective’ and erroneous data used by the Government to decide who qualified for compensation.
While the Government has acknowledged that with-profits annuitants suffered most from the failure of regulators to monitor the insurer, leading to its near demise in 2000, it has divided these customers into two camps.
While those 37,000 customers who took out with-profits annuities after September 1992 will receive 100% of their losses, earlier annuitants will get nothing.
The Government argues these annuitants did not suffer overall losses because they benefited from generous bonus increases in the early years of their annuities.
But research by the Equitable Members' Group (EMAG) suggests this is not the case and that many policyholders suffered devastating losses.
Mail on Sunday, Jeff Prestridge 4 June, 2011
Equitable Life victims face more delays and disappointment in fight for compensation
Thousands of victims of the Equitable Life collapse face more delays in receiving compensation for their losses in the failed pension company. Some 37,000 pensioners will have part of their payments spread out over five years, dashing hopes they were in line for a lump-sum cheque this summer and raising concerns some may die before they receive the full amount. Details of the complicated compensation scheme were spelled out in a 50-page Treasury document published yesterday.
A sum of £1.5billion will be paid in total to 945,000 victims. The first payments are due to be made by the end of next month, and £1billion will be handed out over the next three years. But campaigners say 10,000 of the oldest surviving pensioners have been ‘callously excluded from compensation’ and will receive nothing at all.
And a million victims will remain in the dark on what they will receive for up to a year because the Treasury is sending out letters explaining the awards over a 12-month period. Some will not receive any payments until 2014.
Policyholders have waited more than a decade for compensation after the company came to the brink of ruin in 2000. More than 30,000 have died over that time without receiving a penny because the Labour government resisted all attempts to come to a settlement.
A coruscating report in 2008 by the Parliamentary Ombudsman, Ann Abraham, found wholesale maladministration on the part of the previous government and the regulators and recommended compensation should be paid.
The Coalition promised to pay fair redress to policyholders who had lost out. Under its scheme, victims will receive sums equal to 22.4 per cent of the amount they lost, compared with if they had invested with a rival insurer.
Campaigners dismissed the £1.5billion payout as ‘woefully inadequate’. The Equitable Members' Action Group argues victims should share in a total pot of £5–6billion.
Spokesman Paul Braithwaite said:
‘It has taken the Government ten months to come out with a penny-pinching scheme to be eked out over the next five years. Why can't the victims, who've already waited a decade, be paid out their due this year?’
The Treasury admits that policyholders have suffered losses of £4.3billion compared with returns they would have earned with another provider. But it says it is paying a lesser sum due to ‘pressures on the public purse’.
A spokesman added:
‘There has been no delay. We said we would begin paying compensation in June and that is what we are doing. Through spreading the payments we can afford to give people more money.
‘The compensation will cover people who took out policies between 1 September 1992 and 31 December 2000.’
The Daily Mail, Ruth Sunderland 17 May, 2011
- The Financial Secretary to the Treasury (Mr Mark Hoban):
- I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate...
It is also important to note that, even in the midst of last year's understandably constrained spending review, we still found a way to cover the losses of the with-profits or trapped annuitants in full. That was achieved by paying their losses through annual payments that reflected the structure of their policy. Those policyholders were particularly vulnerable to their losses because they were unable to move their funds elsewhere or mitigate the impact of their losses through employment. They were also generally the oldest policyholders.
The hon. Member for Central Ayrshire raised his concerns about the exclusion of those with-profits annuitants who purchased their policy before September 1992 from the scheme. He is not the first to do so, but this is an important opportunity to restate what I have said in correspondence to a number of hon. Members and what I said in the Committee that considered the 2010 Act. In her report, the ombudsman recommended that the aim of the scheme should be
‘to put those people who suffered a relative loss back into the position that they would have been in had maladministration not occurred’.
With-profits annuitants who bought their policies before September 1992 did so before maladministration could have affected their investment decision. The first returns that the ombudsman found were affected by maladministration were those of 1991, which would not have influenced policyholders' decisions until September 1992. Once a with-profits annuitant had purchased their policy, they did not have the option to move it elsewhere. Therefore, the correct question is not what these policyholders would have received if they had invested in a different company or had transferred their policies at some date after September 1992, but how their Equitable Life policy would have performed if maladministration had not occurred. Calculations by Towers Watson show that, if there had been no maladministration, those policies would not have performed better than they actually did, so no loss has been suffered.
For pre-September 1992 with-profits annuitants, the reduction in the levels of annuity payments is largely due to a combination of circumstances, such as poor investment market performance and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing...
I will be placing a scheme design document before Parliament imminently. In that document, hon. Members will find details on how the new payment scheme will work, including information on who will receive payments, how those payments will be calculated and how they will be made...
I want to make one final point to set policyholders' minds at rest. Policyholders do not need to do anything to claim their payments. Those operating the scheme will contact them in the first instance. A website and call centre will be up and running for the duration of the scheme to guide policyholders and address any queries they may have.
- Mr Donohoe:
- Will the Minister tell me for how long the scheme will be up and running and whether payments will be made over a three-year cycle?
- Mr Hoban:
- The hon. Gentleman has raised an important point. We need to distinguish between two groups. The first is the eligible with-profits annuitants. Payments will be made to them over the lifetime of their policy. That has enabled us to extend the cost of this beyond the spending review and therefore to spend more on resolving the problem than would otherwise have been the case.
Other policyholders who have suffered losses and are eligible for compensation will receive a single payment at some point over the next three years, with priority being given to the oldest policyholders and the estates of deceased policyholders. That is to ensure the cost of the scheme is manageable and that the scheme is deliverable in the period.
We have spent a lot of time making sure that the administration and delivery of the scheme works as effectively and as quickly as possible. However, I do not want to give any false promises to people. We said that we would start to make payments before the end of next month. It is a three-year scheme for people, apart from for those who are with-profits annuitants. For with-profits annuitants, payments will be made over their lifetimes, which is the right way to maximise the amount of money available to policyholders given the economic situation that we inherited...
Hansard for 4 May, 2011 Westminster Hall, Commons adjournment debate on Equitable Life.
Revealed: Why SFO failed to pursue Equitable Life
The Serious Fraud Office decided to drop an investigation into Equitable Life because financial regulators were already aware of potential criminal activity at the failed insurer, according to an explosive new document.
The 19–page ‘vetting note’ dating from December 2005 has been published following a Freedom of Information request. Its contents are highly embarrassing for the regulators meant to be overseeing the mutual insurer in the run-up to its collapse.
In a key passage the document states:
‘...in very many cases, transactions, activities and representations which might be considered to be criminal offences were known to the regulators.’
‘It is therefore very likely that potential defendants would raise many defences based on having disclosed what they were doing to the regulators and having received their approval, or at least not received their disapproval...’
The SFO probed the insurer in March 2004 after the publication of a damning report into its collapse by Lord Penrose. But in December 2005 it angered policyholders by announcing it would not press ahead with a criminal investigation.
The Mail last month revealed how the SFO had been ordered to publish its reasons by the Information Commissioner's Office — a body set up to protect the public's right to data.
It followed a Freedom of Information request lodged two years ago by equitable victim Stephen Wynn.
The SFO ruled that prosecuting former directors could ‘lead to a further loss of confidence in the pensions industry as a whole’. It stated there ‘is a potential that all the Society's sales of pension products to individuals between 1982 and 2000 were mis-sold’.
However, it concluded:
‘This again is a matter for the regulator or for civil action and not for criminal prosecution.’
The SFO said the closest Equitable came to committing investment fraud was when it launched an advertising campaign to attract new investment, despite being close to collapse. However, it concluded this made ‘commercial sense’ and was ‘almost certainly conducted honestly’ to attract a buyer for the firm.
The revelations have angered Equitable's policyholders who have been fighting for compensation for over a decade. The Coalition government announced a £1.5billion compensation package for victims last October, but victims say this represents a fraction of their losses.
Paul Weir, spokesman for the Equitable Life Members' Action Group EMAG, said:
‘The regulators were obviously up to their neck in this and knew exactly what was going on. We will continue to fight for proper compensation.’
The FSA declined to comment.
Daily Mail, by James Salmon 9 April 2011
We will haunt MPs until they put this grave injustice right’
Equitable Life campaigner vows to continue the fight for more compensation. Although Equitable Life's announcement is a bit of good news for some departing policyholders, it will not benefit the vast majority who are looking at losses of 85pc — despite the compensation due to be paid by the Government.
In spite of collective losses in excess of £6bn, the Government is proposing to pay 945,000 victims of the Equitable Life scandal just 15pc of the amount they have actually lost.
This means that someone who has lost £50,000 from their pension pot may receive just £7,500 in compensation at some point between now and 2014. It is unclear whether any further interest will be paid to compensate for the delay.
The Government has already admitted that victims' losses exceed £4bn, but the Equitable Members' Action Group (EMAG) reckons they are closer to £6.3bn when maladministration from 1991 and exit penalties are taken into account.
The £775m allocated for non with-profits annuitants means that victims can expect to get just 15pc of their losses. EMAG will be renewing its campaign to press for full compensation by the end of this parliament. We know from our bulging postbag that our members are furious at what they see as a broken pledge from the coalition.
We are restructuring EMAG to assist local groups who will be visiting their MPs to express their anger and to ensure that they do not think the ‘Equitable problem’ is dealt with. Our members will be relentless in pressing for the compensation they deserve. The Government has made a big mistake and we will haunt MPs until they put this grave injustice right.
We are also demanding that the Government urgently reconsider its decision to exclude an estimated 10,000 with-profits annuitants who had the misfortune to take their pension between 1987 and 1992. It is shameful that these pensioners have been excluded from receiving anything at all. By definition these people are likely to be even older and more frail than the post-1992 with-profits annuitants that the Government said were the most deserving of 100pc compensation.
The Government claims that they have made excessive gains and should not be compensated at all. But EMAG has obtained the pension income figures for a number of these annuitants — for policies started both before and after the cut-off date of September 1 1992.
This data shows a remarkable consistency between the losses of both groups. Typically their annual pensions continued paying out roughly the same amount until 2003 when they started to plummet thanks to falling bonus rates. By 2011 most of these annuitants have seen their pension income slashed by around 60pc. And it is still going down, every year.
Since compensation for other annuitants is designed to offset any gains against losses, we would argue that if what the Treasury claims about excessive gains is true then there would be no cost incurred by including the pre-1992 annuitants in the same scheme on the same basis. If they really have lost nothing, then no compensation would be due.
However, if, as EMAG claims, they did lose, then the Government would have to find more money to put matters right.
Time is short — the average age of these annuitants is 85 and many may not live to see any compensation unless the Government acts this year. We estimate the cost at about £150m, or £50m a year for the next three years. This contrasts with the £620m promised to the 37,000 people who took out a with-profits annuity after 1992.
A caring, compassionate government would ignore the technicalities and make ex-gratia payments available to these annuitants now, on the same basis of calculation as that applied to those whose policies started after 1992.
We call on the Government to honour the spirit of its election pledge to Equitable Life victims and to right this disgraceful wrong immediately.
Daily Telegraph, by Paul Weir of EMAG 28th Mar 2011
The Serious Fraud Office (SFO) has been ordered to justify its decision not to pursue an investigation into collapsed insurer Equitable Life following a freedom of information request from an angry policyholder.
The Information Commissioner's Office — an independent body set up to protect the public's right to data — has instructed the SFO to release a 'vetting note' setting out why it refused to carry out a criminal probe into the conduct of the insurer's former management.
The SFO looked into the insurer in March 2004 after the publication of a report into its downfall by Lord Penrose but in December 2005 announced it had decided not to proceed with an investigation.
The commissioner's order to publish the information behind that decision follows a request from Equitable victim Stephen Wynn from Brighton.
In a detailed 22–page letter, the commissioner said some information had been ‘incorrectly withheld‘ by the SFO and that the organisation had kept faulty records relating to the Equitable case.
Phillippa Williamson, the SFO's chief executive, said that despite an extensive search she was unable to locate various legal advice documents the commissioner had inquired about, and acknowledged that errors existed in record-keeping. She added that steps are being taken to improve systems.
Paul Braithwaite of the Equitable Members Action Group, said: ‘I think it was a cynical act by the Treasury to park it at the SFO where it sat for more than a year. I don't believe for a moment it was properly investigated.
‘I think the conclusion is very obvious that the SFO have good reason to seek to conceal their behaviour. It is shocking but typical that documents have gone missing.’
The Equitable revelations are a fresh embarrassment for the SFO, which was heavily criticised for dropping its inquiry into allegations of corruption at arms manufacturer BAE Systems.
It argued that releasing the Equitable information could affect its ability to conduct a potential prosecution even though no moves have been made to do so for more than seven years.
Officials at the SFO have 35 days from the date of the ruling on March 3 to comply or risk being found in contempt of court.
The commissioner also highlighted concerns including ‘some difficulty in confirming the scope of the withheld information’ and noted that some of the information given to him ‘does not appear to relate to Equitable Life’.
The SFO is considering whether to appeal.
The Daily Mail, by Ruth Sunderland 16 March 2011
Commission's report outlines Equitable Life payments
Victims of collapsed insurer Equitable Life will receive payments equivalent to 22.4% of their ‘relative loss,’ the government has announced.
The Treasury's Independent Commission on Equitable Life Payments' Report said the oldest policyholders should receive compensation first, followed by the estates of deceased policyholders and the estates of those who die before receiving payment in the next three years.
The 130-page report recommends that around 945,000 policyholders should receive payments equivalent to 22.4 per cent of their relative losses while the remaining 100,000 policyholders with relative losses should receive no payment because their proportionate allocation amounts to less than £10.
The report also said that almost 70% of 11,250 known eligible estates could receive payment in the first year; while 95% of all eligible policyholders over the age of 75 could receive their payment in the first year of the payments scheme.
All eligible policyholders aged more than 60 with individual, as opposed to group scheme, policies could receive their payment in the first year.
The Treasury will publish a scheme design document setting out the practical implications of the recommendations along with a timetable for making payments It will also include details of the complaints and challenges procedure.
Mark Hoban, financial secretary to the Treasury, said: "We have always been committed to making fair and transparent payments to Equitable Life policyholders through an independently designed payment scheme for their relative loss as a result of regulatory failure...
Mr Pomeroy, chairman of the commission, said:
‘The government has accepted all our recommended principles. The commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent and fair for policyholders..."
Financial Adviser, by Marc Shoffman 3 Feb,'11
...The Government this week confirmed that 945,000 present and former policyholders will share compensation of £775 million, equating to just 22% of their losses — though the Equitable Members Action Group has said the real figure is 15%. In an independent assessment, actuaries Towers Watson calculated the total loss of this group at £3.5 billion.
Equitable’s 37,000 with-profits annuitants, who have had no choice but to stay with the holed insurer, will receive 100% compensation, sharing £620m paid out over time.
EMAG said: ‘We are digging in for a long campaign to get the rest.’
But the Government said it was accepting the recommendations of its independent commission. Losses would be assessed on a per policyholder basis, and the payments would not be means-tested.
Compensation would be paid to the oldest policyholders first, and the estates of deceased policyholders and those of people who die before receiving a payment would also be prioritised.
The Government will publish a scheme design setting out when payments will be made, which will be scrutinised by MPs in the spring — but after a decade of debate the payout has effectively been finalised.
Financial Secretary to the Treasury Mark Hoban said:
‘We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure. I am grateful for the work the commission has done to establish policyholders’ concerns and have used this to recommend the principles of the payment scheme...’
Paul Weir, of EMAG, said: ‘Just before the election, politicians were falling over themselves to appear to back us, but what has been delivered is not what we have waited all these years for.’
He added: ‘If we have to wait until the next election to use our votes again to show what we think of their compensation package, then we will do that.’ Mr Weir lost an estimated £50,000 from his pension pot, but is due just £7500 in compensation.
Ros Altmann, director general of the over-50s campaign group Saga, said the settlement was ‘a far cry from the recommendation’ of the parliamentary ombudsman, who had urged the Government to compensate victims in full for over £4 billion of losses.
The Herald, by Simon Bain. 5 February, 2011
David Cameron’s deal on Equitable Life payouts ‘a slap in the face’
Equitable Life policyholders said that they had been given a ‘slap in the face’ by a government announcement that they would only get back a quarter of the money they lost.
David Cameron was accused of ‘cynically’ raising the hopes of more than a million policyholders by promising when in opposition to ‘sort out’ Equitable Life, only to limit payments to the level agreed by the last government.
The awarding of ‘proper’ compensation to Equitable victims was included in both the Conservative and Liberal Democrat election manifestos.
All 97 MPs on the Tory front bench team signed a pledge to the policyholders’ action group to introduce adequate payments. But the exact amount of compensation was never specified. Yesterday, the Treasury announced that 945,000 with-profits policyholders would receive 22.4 per cent of their losses, with younger members having to wait up to three years for payments.
The figure was similar to that set by a retired judge as part of a review led by the Labour government, which was heavily criticised by the Conservatives.
Paul Weir, of the Equitable Life Action Group, accused Mr Cameron of making his pre-election pledge to win the votes of policyholders, despite knowing it would be unlikely that cash could be found to deliver his promise.
‘This is a slap in the face for Equitable Life policyholders, and it is certainly not what we voted for in May. Just before the election, politicians were falling over themselves to appear to back us, but what has been delivered is not what we have waited all these years for.
‘Even as they were playing footsie with us, signing our pledge, they were already planning to renege on it. It’s not like they opened the cupboard and suddenly found out the money wasn’t there.
‘If we have to wait until the next election to use our votes again to show what we think of their compensation package, then we will do that.’
Mark Hoban, a Treasury minister, said: ‘We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure.’
The Government had previously announced that another 37,000 people with Equitable Life annuities would be compensated for their losses in full, with regular payments for life. Large numbers of victims have already died before receiving compensation.
Mr Hoban said that their estates would be the first to receive the new compensation awards for with-profits policyholders, along with elderly members.
But younger people could have to wait until 2014 — 14 years after the scandal broke — with a total of £775million due to be paid out to without-profits policyholders, with no interest.
Daily Telegraph, by Rosa Prince, 26 Jan 2011
Key questions on Equitable for Mr Hoban
Mark Hoban, Financial Secretary to the Treasury, will be grilled by the Equitable Life all-party group of MPs on Wednesday over his £1.5billion compensation deal for victims of maladministration at the mutual.
Although I possess no crystal ball, it should be a fiery meeting as some MPs — fired up by angry constituents — ask him to justify the way he has decided to cut the compensation cake.
In particular, they will question why he has authorised 100 per cent compensation for 37,000 with-profits annuitants, while ruling out compensation for 10,000 earlier annuitants (essentially those who took them out before September 1992).
On average, all other Equitable victims will receive compensation equivalent to 20 per cent of their maladministration losses, although the precise terms of distribution have been left to an independent commission that will report by the end of the month. Hoban, no doubt, will tough it out, buoyed by the fact that the Equitable Life (Payments) Bill received Royal Assent just before Christmas, paving the way for compensation.
But at the very least, he must provide MPs with answers to three key questions:
First, how can he defend the exclusion of 10,000 with-profits annuitants from compensation on the spurious grounds that they received overpayments in the early years (as a result of the mutual paying too much in bonuses) when all the evidence suggests they have suffered just as much financially as other with-profits annuitants?
The splendid Equitable Members’ Action Group says it would cost less than £200 million to offer these people compensation. Given that the Treasury has a £100 million ‘contingency’ fund built in to the overall £1.5billion package, surely this money could be used to provide some compensation to these forgotten Equitable victims?
Second, did Hoban mislead MPs into voting against an amendment tabled by Fabian Hamilton (Labour MP for Leeds north East) last November that would have extended compensation to all with profits annuitants, irrespective of when they took out the annuities?
Anecdotal evidence suggests some MPs felt they were tricked.
And third, why have payments not yet begun for the 37,000 with-profits annuitants who are due compensation?
There is no reason why these should not start immediately, given that many of these people are elderly and desperate for compensation. The Treasury knows who they are, possesses their details and, given it is administering their compensation directly (as opposed to the independent commission), it should start paying now.
Of course, Hoban must be applauded for sorting out the Equitable ‘issue’ after ten years of Labour procrastination. Particularly so in light of the parlous state of the country’s finances. But any resolution should be fair, not soured by injustice.
Mail on Sunday, by Jeff Prestridge 9 January, 2011