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

Equitable Members Action Group

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

Documents: 12/10/2001 - Some Responses Received Up to 12 October 2001

Some Responses Received Up to 12 October 2001


As a policy holder, I will be reluctantly voting for the compromise proposals. However, I am also a non GAR with profits annuitant (as well as a minor policy holder/member). This annuity represents a large part of my retirement income, derived from a significant capital sum from various providers, and I find the offer to the with profits annuitants to be dreadful, with the certain prospect of major annuity reductions in future years (the indefinite annual 1.5% performance deduction compounding the poor investment performance which we must expect to be even worse from a ring-fenced Equitable rump, than over the years past.)
No one has mentioned that the returns for long term investors, even after July, compare favourably with others, the arch critic Liz Dolan concedes this point. Browns spending budget, Afghan, never mind Railtrack could well spell higher taxes. So forget any help for what are considered the well- heeled. Whether a non GAR (self) or a GAR we are on our own and in the same boat, if any help does arrive it will be a long time coming. Forgive the pun but the boat is a lifeboat, if we pull together we can survive. We will all have lost something. To the wealthy it probably won't make that much difference but to the majority who are totally financially dependant on their Policies a Yes vote does give them a chance of some security for the future. Please remember that long term closed funds tend to do well.
It seems to me that we must accept the compromise, especially so for those with GAR policies. Just suppose that the compromise does not get the vote that it needs, what will be the result? As the non-GARs will have to continue losing money so that the GARs can have their contractually guaranteed annuities, I would expect that nearly all non-GAR holders will take the hit and get their money out before they lose even more. This will leave only the GARs' money in the pot so the chances are that they won't be able to cover the costs of their own GARs, so they won't get them anyway. We are all going to lose out whatever, but it seems to me that we will lose out even more without the compromise, with the GAR holders losing out the most.
Most of ELAS's present difficulties were caused by the totally unexpected ruling of the House of Lords in late summer 2000. Unfortunately the Law Lords only heard the case of the GARs, and were too zealous in applying the minutiae of the law. In overturning the equitable solution for which the Equitable Board sought their approval, they were wreckers of reason, and proved once again the old adage that the law is an ass.

In his Way Forward proposal Vanni Treves, a lawyer by profession, has shown that he is a master of presentation. It is a pity that his proposal contains not one shred of justice. Having cut 20% from the value of every With Profits policy in the summer of this year, he now proposes to give back 17.5% to the GARs in return for the surrender of their GAR rights and 2.5% to the non-GARs in return for the surrender of their right to sue. If accepted this would leave the GAR-holders without their GARs and 2.5% worse off than they were a few months ago. The non-GARs would be 17.5% worse off. In short, Treves proposes to make everyone worse off, and to rob the non-GARs to pay the GARs.

I do not believe that Treves has the good of the Society at heart. We have waited a long time for a fair solution, which the Way Forward is not. The Society cannot go forward on a foundation of gross injustice. As a non-GAR, I shall vote "No".

I have read the documents carefully. there has obviously been a lot of work gone into them and I will supporting the proposals.
In general I feel that members should support the compromise even though it will be a difficult pill to swallow for many. Especially in the current market, it is essential that the fund is quickly enabled to invest properly to make the best of the remaining assets, and this requires certainty on the GAR position. I agree that the compromise document is short on numbers, but I suspect that the more numbers are presented by the Board the greater is the opportunity for debate and prevarication. A healthy dose of pragmatism and trust is now required. These are not qualities easily called on after the last few years, but as the old war cartoon said: "If you know of a better hole...".

On a particular point I do feel that the position of the with profits annuitants (the one group with no exit option) has not been either properly recognised in the explanation of the compromise or in the proposed levels of compensation.

Finally, I agree with other comments on the website that accepting the compromise does not bar other legal, political and regulatory action, whether by members individually, the action groups or the Society.

The GAR's have no value when interest rates fall. If the GAR's had their own fund, as they ought to have had, they would be on their own. They can only be satisfied by taking money from third parties. In a mutual fund, according to the Lords, they take it from non-GAR's. In a joint stock company it would be the shareholders. The 'Society' have given these guarantees but the 'Society' has no means to honour them. It is no use saying that non-GARS can only sue for a smaller amount than that given to GAR's. By the principles of Equity and Mutuality the counter claim must be for the same amount. The result being that the GAR's get nothing. It is idle to say that the GAR's would then have a counter claim as that would give rise to tit-for-tat claims to infinity. GAR claims can only be met from third party funds - PERIOD!!
I attended policy holders meeting in Birmingham 29 October am. Star performance by Vanni Treeves and the Chief Exec. I support the compromise as best deal possible though like all compromises it satifies no-one. I have made special pleading for those like me who are retired as follows " Non GAR's who are retired & whose annuities/pensions determine a measure of their living standards in retirement are the most vulnerable and are tied to the Society without option. The Halifax 250 million provides a fair opportunity for some extra compensation to those of us now retired" I believe the new Board of the Society has done and is doing a very good (and thankless) task and I intend to vote for the compromise.
What sticks in my guts is the facts that out of this 'single pot' of money, the NON GAR's have to subsidise the GARs. If a non GAR and a GAR both have plans valued at £100,000 each the GAR gets £17,500 and the non GAR gets £2,500. How can this be equitable? It's not a company or society per se that's giving to the GARs it's the non GAR members giving up most of their share of the pot to the GARs.
EL's compromise consultation is a farce, as we do not know what portion of guarantee we have left in our GAR policies. If I read EL correctly they propose an uplift of 16.3% on my GAR after a slash in July of 16% on the "total value" (rapid reckoner) of my policy. I am still baffled on how they could "word" a reduction of 16% on the total value of my policy, including the "guaranteed" portion. Doesn't that look like a almost zero operation, unless I have missed the point altogether in their fuzzy document. Why should I give up my GA rate of 9% by 2005, given the current annuity market ?
Am I the only person who thinks this is more significant for what it does not say than what it does say? The basis of the proposal to buy off the members is the total amount of of money claimed to be available as set out on page 10. This begs the following questions:-
  1. What happened to the £640 million balance of the £1.7billion set aside in the 2000 accounts-see page 8 and note18 ?
  2. Where has the first £500 million from the Halifax gone to? Where has the income for 1st Jan to 30th June 2001 gone to and how much
  3. was it?

The combination of these would more than double the funds available for a compromise.They are of course in addition to the 16% reduction made in fund values in July and the less than full allocation of investment returns made to the with profits funds during good investment years.

In my Comments Card I have put forward the following:-
  - CHOICE should be included as a fifth Basic Principle;
  - This would acknowledge that annuitants have no freedom of choice;
  - Shaving 1/4 percent off the other deals would fund a better deal for annuitants, eg. a) forgo the 2.5% uplift b) rescind the 1.5% perf. drag.

I fully endorse some of the comments from members regarding the concerns of annuitants. Fully paid up funds have been entrusted to the Equitable to provide members such as myself with a safe, regular income in our retirement which should at least keep pace with uplifts in the cost of living.

As a result of the GAR ruling our With Profit Annuity bonus rate is being reduced by 1.5% PA until further notice I consider this to be unacceptable and totally unfair as we have no means at our disposal to seek alternative retirement pension income. We are a group of people stuck with an Equitable annuity contract with no way out.

The Society must acknowledge and honour the fact that a fully paid up retirement pot was entrusted to them and contractually, I consider annuitants should not be asked to sacrifice their livelyhood to help out either GAR or non GAR policy holders. They have a way out. We don't.

From a personal point of view I need to put on record that as long as 3-4 years ago I wrote to the Society expressing my concerns. At all times I was assured both verbally and in writing that the Society had sufficient reserves to weather the storm. On Dec. 27th 2000 I wrote " I feel we have a strong case against the Society for allowing products such as ANN's, IPP's, Bonds etc to be sold without investors being fully notified of potential loopholes. I consider the Society has misled us and acted irresponsibly".

We need more accurate information in order that we may plan what is left of our future. Over the years, we have worked hard to ensure sufficient funds were available to provide us with a decent and safe pension. Did any body think about compensation for sleepless nights and worry. As annuitants, we don't deserve this.

The only concrete part of the proposed compromise is the difference between the offer to the GARs and non-GARs. The 2.5% to non-GARs isn't real because a simple decision of the board can remove it (or more) again at any time just like the previous 16%. I'm a non-GAR with very substantial losses and I won't vote for any compromise without clear guarantees on the 'guaranteed' part of my fund which was what I had always believed I had. I believe that litigation to offset my losses to GAR's has a much better chance of success than 2.5%.

Being realistic and accepting that there has been a fiasco and that there is a price to pay for this (which unfortunately falls on the policyholders), 5% isn't that painful (and Equitable would probably argue that it should be 2.5% - i.e. the 7 month's loss of bonus for 2000 less the uplift - i.e. that the 2001 cut in bonus was for a different reason - see below).

Regarding whether the uplift of 2.5% is guaranteed or not, one might reasonable argue that what was taken away before was not guaranteed, so why should the restitution be guaranteed? (although there is an issue with negative terminal bonuses at non-contractual events.)

A more certain point is that the non-GAR policyholders with a 3.5%p.a. guarantee are being treated differently (only getting 0.5% of the uplift guaranteed), whereas the uplifts for other policyholders (GAR and non-GAR) are getting uplifts on the guaranteed component that either exceeds or is very near to the overall uplift. Why the discrimination?

The bottom line is that, as a non-GAR policy holder, I still feel that I could live with what is being offered, in the context that it is being offered (although I have an issue with the guaranteeing of the uplift). HOWEVER this does not address the issues of the slashing of 16% from policy values in July 2001 and the associated reduction in 2001 bonuses. My feeling is that this is a sleight of hand on the part of the board and it leaves a nasty taste in my mouth!!! IT MAY BE FOR THIS REASON ALONE THAT THE PROPOSED COMPROMISE WILL FAIL!

I am 61, and I have my life`s savings in an Equitable "With Profits" fund. I had hoped to retire at 65, but that now seems very unlikely. The following is the situation as I understand it at present, and appears to place me and many other members, "between a rock and several hard places". As the Equitable are offering 2.5% "uplift" to With Profits Fund Holders, in exchange for waiving their rights to sue the Society for "Mis-Selling", one might reasonably assume that there are probably grounds for redress in this regard! My dilemma, therefore, is whether to "stay in" and risk losing more of my fund to those members who leave and who may pursue a successful case against the Equitable, or to get out myself. As you know, choices are decidedly limited in this regard also. One either take a further 10% "hit", or one buys an annuity at a very low rate, or one goes to "Drawdown". All these options lack the most critical choice of all in these circumstances:- "timing". Whatever is done must be done soon, and this is bad news economically for members of the "With Profits Fund".
No problem. But the time for talking about the possibility of maybe considering what might perhaps be feasible in entertaining a potential scheme of arrangement is long past. We all live in the real world and it is time to concentrate minds before things are overtaken by events. In other words it is essential to move faster than the outside world, otherwise the scheme will always be out of date, and under perpetual modification, a pursuit after ever-changing goalposts. Thanks to the ever-extended delays, the Society is in much murkier financial waters - implosion of financial markets - than it would have been had members been voting in, say, March this year.

It has to be made clear that a no vote serves notice of liquidation of the Society (and with it those guarantees, which might not be a bad thing as far as some of us are concerned).

I do not believe the Scheme really addresses the concerns of annuitants. Because we brough mature funds into the Society, we are paying a disproportionate burden. The hits taken last year in July this year are likely to result in significantly lower annuities over the long term compared with present levels, on the basis of likely future bonus levels. This is not being made clear. We need long term projections showing precisely where the annuitants are likely to stand in ten, fifteen, and twenty years time. Of course, unlike other members they cannot take preventive measures such as leaving or adding to their provisions for old age. This is a great scandal and is a typical consequence of the iniquitous House of Lords' judgement.

As a non-GAR member I have two questions:
  1. If the previous board and the society have done nothing wrong why are they trying to buy me off by offering 2.5% in return for dropping further action?
  2. Why are they so long and complicated if not to confuse and intimidate?

I received my ELAS package this morning. This scheme is clearly the best possible way to conserve and restore ELAS's resources. It merits EMAG's support.

Unit Trusts have much higher management expenses than investment trusts. The only consequence of unitising would be to increase costs and to reduce the With Profits income. I hope that the Committee will drop the unitisation idea and support Vanni Treves proposals.

I think it absolutely vital that we agree a compromise. Although my GAR policy had matured, I did not cash it in or take the GA annuity. I stuck with it because I believe in mutuality, and wanted to help see the Society through to clear water.

I believe the people who took it to the House of Lords (led by an IFA with a grudge against the Society) were a small, unrepresentative group conducting a vicious attack on a mutual society. I also believe the Equitable Board at the time should have done what they are doing now: consult the members and get a compromise agreed by a majority to solve the problem. If they had, the House of Lords would have had no jurisdiction.

I should be willing even to accept less than 17.5% top-up to achuieve a compromise, if only it will restore the 16% cut in my original policy value.

Having received my copy of the Proposed Way Ahead, I am appalled by its lack of justice to any class of member. I thought you would like to know that I have today forwarded a formal complaint against the FSA via my MP to the Parliamentary Ombudsman. I found the material provided on the EMAG website very useful in making my complaint.

Thank you for everything you are doing to represent the interests of members.

Surely the Compromise Proposals are the only practical way forward. In my opinion they are very well formulated to give all parties something - a genuine compromise !

Our group should be seen to support these proposals wholeheartedly and without equivocation, and, in company with the other groups, persuade all policyholders to accept - in the best interests of all concerned.

In response to your e-mail of 20th September, I have read the proposal for compromise and it is quite unacceptable.

As the holder of two substantial Fixed GAR policies, which will mature in 2004 when I take an annuity at the age of 60, I am offered an uplift of a maximum of 16.3%. Having suffered a reduction in value of 16%, I am effectively offered nothing to give up a valuable right.

I would be prepared to accept a reduction in my guaranteed annuity rate of 10.3% to say 8% if I was offered a meaningful uplift over 20% otherwise I shall not vote in favour. The Society has given no indication of what annuity rates are at present or will be in 2004. Nor have they given an indication of Final Bonus rates. Without this essential information, the proposal is useless.

To me it is a matter of trust. The House of Lords seems to have thrown out the relationship of trust with the Board and I do not have a watertight contract re my policy. The Board has not yet published the Halifax agreement or given us a true and uptodate financial analysis. 2.5% does not make up for the absence of trust.
Today, received a lurid purple package from Equitable outlining their proposal and asking for comments. Have filled in the form with very direct comments and made reference to disgraceful appearance by Vanni Treves on 'Watchdog' last night were he arrogantly gave the message "take it or leave it"

I am a Non-Gar and, Equitable have filched at least 24,000 from my (mis) managed pension causing huge problems for my wife and I.

I would like an counter-proposal whereby Eqitable is wound up totally and members' funds transferred to a trust where they may be deposited with the help of IFA's such as Annuity Direct into other companies without penalty. The commissions to IFA's should fund the transfers.

I think that Equitable are just trying to survive and do not care about non-GARs at all.

One of the latest horrors of Equitable seems to be the concept of negative non-guaranteed bonus values. If you look at pages 14 and 15 of their examples, you will see that they quote examples with Policy values lower than the Guaranteed values, implicitly saying that the discretionary bonus can currently be negative. This would appear to apply to me, having foolishly paid in large lump sums and transferred sums from the unit trust component to the WP, thereby having received insufficient non-guaranteed bonus to meet the 16% reduction in total value. Thus, from my policy point of view, the Equitable is insolvent, since it can not honour even the guaranteed values. The Note 2 "Let Out" that the higher value will apply at contractual events is simply a cover device to allow them to steal more from my fund (effectively from the "supposedly" guaranteed part).

There seems to be just as much "smoke and mirrors" from the new Directors as we had from the previous lot.