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

Media Stories: 11/07/2008 - Yet more speculation about the forthcoming PO 2 report

11th July 08: Yet more speculation about the forthcoming PO 2 report

Equitable Life members threaten to sue

Financial Times, by Andrea Felsted, George Parker and Alex Barker: July 11 2008

Disgruntled members of Equitable Life will sue for compensation if the government rejects a damning report by the parliamentary ombudsman, due to be published next week.

The Equitable Members Action Group (EMAG), an independent association of Equitable members and policyholders, plans to instigate a judicial review if the government rejects the findings of Ann Abraham, who is expected to call for compensation for policyholders who lost out from the near-collapse of the life assurer.

"We are confident that there will be a recommendation for compensation and we are hopeful that the government will change its stonewalling behaviour towards the parliamentary ombudsman. But we are preparing for the worst, should that strategy not be changed," said Paul Braithwaite, EMAG general secretary.

If the government refuses to accept the findings, any party affected has a right within three months to instigate a judicial review.

Alistair Darling, the chancellor, has been kept abreast of drafts of the ombudsman's report and Treasury lawyers have also pored over the texts.

However, he has not seen the final report and Treasury officials refuse to speculate on how the chancellor might respond to the final version. Mr Darling's team recognise the legal risks of appearing to have decided its response before the final report is delivered.

But the chancellor accepts shortcomings in the regulatory framework in place at the time, which dated back to 1982. He also points out clear errors at the company were at the heart of the problem.

In any event, Mr Darling is expected to ask for time to study the final report before giving his view on compensation.

Vince Cable, Liberal Democrat deputy leader, said yesterday:
"Although the failure of the regulators occurred under the last Conservative government, a condemnation of civil servants by the ombudsman would be deeply embarrassing, not least if it includes a recommendation for compensation."

Ms Abraham is expected to point to a string of regulatory failings as far back as the end of the 1980s until December 1 2001, when the review period ends, say people familiar with the report.

Her findings will blame the now defunct Department for Trade and Industry, responsible for supervising Equitable until the end of 1997; the Treasury, which then took over supervision; and the Financial Services Authority, which took day-to-day responsibility for regulating insurance in 1999.

The Government Actuary's Department, which provides actuarial services to government departments and was included in the scope of the review in October 2004, is also expected to be the subject of criticism.

Estimates have put the cost of compensating the more than 1m policyholders who lost money in the Equitable debacle at about £4bn.

Compensate Equitable Life policyholders, European Parliament insists

Daily Telegraph, by Yvette Essen 11th July 08

The European Parliament will push for compensation to be paid to Equitable Life policyholders, regardless of any recommendations made by a new report slamming the Government for its role in the demise of the mutual insurer.

MEP Mairead McGuinness, who chaired a committee of inquiry into Equitable last year which said UK regulators did not properly supervise Equitable Life, yesterday vowed to pile pressure on the Government for a payout to policyholders who lost out when it was forced to close to new business in 2001.

She said: "In any civilised society, or democracy, where the regulator has failed, people deserve to be compensated for the losses incurred. It has been appalling."

Ms McGuinness' pledge to start lobbying the Government for the million-plus policyholders who saw up to 50pc of their pensions and savings lost when Equitable was unable to honour promised bonuses, comes days before the publication of an independent report into the role of regulatory bodies.

A draft copy of the Parliamentary Ombudsman's findings, seen by this newspaper, showed author Ann Abraham citing numerous examples of the Government being guilty of maladministration leading to injustice. The final report will be unveiled on Thursday, and mark a major chapter for Equitable, which once was a £26bn business.

Yesterday, more than 400 people signed The Daily Telegraph's online petition, calling for compensation to be paid to policyholders who were affected. Backing the campaign, Ms McGuinness said: "People invested mainly in good faith, in essence doing what they should do as good citizens to provide themselves with pensions and ended up being burned financially - not because of their recklessness, but because of what we discovered were responsibilities resting with the regulation in the UK."

Ms McGuinness added, to date, the UK has only sent an acknowledgement to last summer's findings and a letter from Hans-Gert Pöttering, the president of the European Parliament.

Andrew Tyrie, who as shadow paymaster general in 2004 was instrumental in forcing the Government to allow Ms Abraham to launch her investigation, said: "Where maladministration has been found, I have always argued that, in principle, compensation should follow. "

Lord Matthew Oakeshott, Liberal Democrats pensions spokesman, said that, if Ms Abraham recommends compensation, Government must respond quickly, unlike in the Occupational Pensions case, where it initially refused to compensate 150,000 who lost money when schemes were wound up. "The Government must not replay that sorry saga, slapping the Parliamentary Ombudsman in the face and pouring millions of taxpayers' money down the drain on lawyers fees".

”At last, Equitable Life's dark secrets are out in the open

Next week, a skeleton will tumble out of the Government's cupboard. The rattling bones of Equitable Life have been kept under lock and key for years but the long-awaited publication of the Ombudsman's report will bring them back into the light of day. It is now nearly eight years since this once respected life insurance company closed its doors to new investors and was obliged to default on its obligations to its policyholders. From the outset, questions were raised, not just about the behaviour of the management, but also about the competence of the Government in its capacity as regulator. The DTI, the Treasury and then the FSA - and in parallel the Government Actuary's Department - had responsibility for ensuring that the company acted properly and prudently. There have been nagging questions about the Government's competence in the discharge of these regulatory duties.

With the potential for compensation claims, the Government has been very anxious to avoid the conclusion that maladministration was involved. The Treasury's tactics have resembled the Roman general Fabius Cunctator, whose skill lay in avoiding battle, distracting and exhausting the Carthaginian opposition. It has played for time, hoping that the policyholders would give up and go away. They haven't.

The Government initially required the FSA to prepare a report into its own conduct (Ronnie Baird) which concluded that the damage had been done before the FSA took over. The Government then commissioned an inquiry by the Scottish judge Lord Penrose. The Government set the terms of reference very wide and the Government was under no obligation to accept the conclusions, which specifically precluded references to maladministration or compensation. Lord Penrose published a thorough report - the best part of three years later.

There were enough references in the report to failures by the regulatory authorities to imply, strongly, that maladministration occurred, but the report was sufficiently Delphic on this point to give the Government a line of retreat. There was enough in Penrose to persuade the Ombudsman to investigate maladministration. The Ombudsman's investigation has taken over four years and there is little doubt that the Government foot-dragging has contributed to the delays.

I have not been shown the final document but there are plausible reports that it is damning in its finding of government maladministration. Even without access to the report, it is clear where the government regulator failed - mainly in the early 1990s. It allowed the society to "over bonus" without interceding, favouring those with prior guarantees at the expense of new investors, without their knowledge. It allowed Equitable to sell unguaranteed products as low-risk products without buyers being able to appreciate the existence of prior guarantees. The society traded without adequate reserves and grossly misleading accounts were published under the nose of the regulator. And the regulator endorsed differential bonuses to correct earlier imbalances, later ruled illegal.

There is more at stake in the publication of the Ombudsman's report than its technical findings. If the Government ignores the report, many people will wonder what the Ombudsman is for.

There is little doubt that many of Equitable's pension savers have lost a significant proportion of their savings, particularly the annuitants. The likely sums involved are sufficiently large to frighten the Government, even though the payments would be spread over a long period.

The Government fought to avoid paying compensation to the occupational pensioners, despite the real hardship among those who had already lost their jobs. Eventually, after a tireless campaign led by Ros Altmann, compensation was paid.

Equitable Life policyholders have built up a strong case and are well organised. The Treasury might be well advised to open negotiations.

Dr Vince Cable, The Daily Telegraph 11th July, 2008

Can we really expect justice for Equitable Life victims?

Citywire, by Chris Marshall 10 July 2008

Seven years. That’s how long it has taken to get to the point where Equitable Life policyholders are at least able see a chink of light. Finally, it looks like there might be some justice for the one million victims of the Equitable Life disaster.

Or does it?

Parliamentary Ombudsman Ann Abraham is due to publish her report next week, in which she is expected to urge the government to compensate policyholders to the tune of £4 billion.

In a report that has been delayed three times, Abraham is to point the finger at the Financial Services Authority, Treasury, Government Actuary’s Department and Department of Trade and Industry.

But ministers are not bound to accept her conclusions. That would be to accept the culpability that it has shirked: the government has repeatedly neglected to accept it was guilty of maladministration in overseeing the mutual society, which collapsed in 2001.

Will Gordon Brown’s government pay up?

And have things changed enough that we can avoid a repeat of Equitable Life?

As pensions campaigner Ros Altmann wrote in the Telegraph this week, ‘As with Northern Rock, one has to ask whether the holes in our regulatory regime are due to a system driven too much by the interests of the industries being regulated, rather than the ordinary people who need to be protected?’

Liz Kwantes - Inequitable Life
17:58 | 10 Jul 2008

Having fought on behalf of Equitable policyholders, since December 2000, I think I can be reasonably certain that the fight is not over with the PO's report. So far there must have been around ten major reports on Equitable costing by now millions of pounds. As soon as we thought there was light at the end of the tunnel another door was slammed in our faces. To think that I thought it would all be sorted out by May 2001, how naive I must have been.

Liz Kwantes
Equitable Life Members Support Group

Equitable Life report strikes further blow for FSA

Citywire, by Edward Lander 10 July 2008

The government could be pressured into paying compensation to about one million Equitable Life policyholders, according to accounts of an ombudsman report due out next week that accuses regulators of faulty administration.

Parliamentary watchdog Ann Abraham is to point the finger at the Financial Services Authority, Treasury, Government Actuary’s Department and Department of Trade and Industry in her long-awaited report into failings at the troubled mutual society next week, newspapers have reported.

The Parliamentary Ombudsman is expected to respond by urging the government to compensate the more than one million policyholders who lost a collective £4 billion in the Equitable Life scandal.

Abraham’s was forced to return to her original report around four years ago following heavy criticism that the FSA was cleared and the scope of her research did not cover possible failings from other regulatory bodies.

The review investigates concerns that regulators failed to protect policyholders at Equitable Life from the late 1980s until the near collapse of the mutual society in 2001.

Equitable Life Compensation: What you need to know

Daily Mail by Michael Lea, Daily Mail & Philip Scott, 10 July 2008

A million people who had their savings left in tatters after Equitable Life collapsed in 2000 could now be in line for compensation.

The debacle, which saw 50% wiped off the value of more than 1m customers' savings, earned the firm the nickname Equitable Death.

Customers claim they lost some £4bn in three policy devaluations and ever since have been urging the government to take action.

Parliamentary Ombudsman Ann Abraham published a report in 2003 clearing regulators of any culpability. But in 2004 she reopened her inquiry.

And the latest report into the insurance giant's catastrophe is set to rule that finance watchdogs - including the Treasury, Financial Services Authority and Government Actuary's Department - were guilty of maladministration.

Here we answer your questions

What has happened?

The problem originates from Equitable Life's selling of pensions between 1950 and 1988 which paid a generous income, called guaranteed annuity rates (GARs). When interest rates fell in the nineties, they were very attractive. But these promises were proving harder to keep and straining Equitable's finances.

It tried to wriggle out of future promises by funding a court case to prove it no longer had to honour these guarantees but lost in the House of Lords. This triggered its collapse and in 2000 Equitable Life put itself up for sale and turned new business away.

Did this work?

No. Equitable reached a compromise with the 90,000 GAR policyholders. In return for giving up their guarantees, it boosted their pension savings by 17.5%. Those without GARs were given 2.5% provided they did not sue the insurer.

What was wrong with that?

The money to pay off GAR policyholders came from a £26bn with-profits fund being paid into by 1.5m policyholders. Those without GARs could be first up for compensation as their money was raided for the compromise. But many GAR-holders were still out of pocket. The report is likely to reveal who should be compensated. The with-profits fund is now valued at under £7bn, mainly due to policyholders who left when problems began.

Who is to blame?

There have been many investigations and reports into the collapse. The most fundamental was the Government-backed Penrose report in 2004 which scuppered the chance of compensation from the Treasury because Lord Penrose pointed the finger at the Equitable board.

What about Government culpability?

Lord Penrose also criticised the Department for Trade and Industry, the Treasury and the Government Actuary's Department for 'failing' policyholders. Parliamentary Ombudsman Ann Abraham is expected to lay more blame on the Government, which could lead to up to £4bn in compensation.

Will the Government pay compensation right away?

Given its track record the answer is 'very unlikely'. More than 100,000 people are victims of collapsed company pensions and it took years to get compensation even after a scathing report by the Parliamentary Ombudsman. Plus the Government is already forking out billions to stabilise Northern Rock.

What if I've retired or transferred my pension?

Equitable had just over a million customers before it hit the skids. Now it has 500,000. But those who left can claim compensation if they were paying into the with-profits fund. Most of the original customers are pension savers. Of these some 60,000 have annuities that are already paying massively reduced incomes. Prudential has taken their policies. About 50,000 people have bonds and endowments.