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: 12/07/2008 - PO Speculation Press Coverage

12 July 2008 - PO Speculation Press Coverage

Brown set to be blamed and shamed

The Independent, James Daley: 12 July 2008

Yet another of Gordon Brown's chickens will be coming home to roost next week, when the Parliamentary Ombudsman, Ann Abraham, publishes a new, damning report that will lay the blame for the collapse of Equitable Life firmly at the feet of the Government.

In her conclusion, she will call on Mr Brown and Alistair Darling, the Chancellor, to stump up something approaching £4bn in compensation for the thousands of customers who lost out, and accuse the Department of Trade & Industry, the Government's Actuary Department, the Treasury and the Financial Services Authority of maladministration. If Mr Brown still has any credibility left when it comes to financial regulation, next week should just about finish him off.

In fairness to the current administration, the troubles at Equitable began well before the Tony and Gordon show came to Downing Street. In the early 1990s, it was the Conservative government which presided over the regime that let Equitable make generous guarantees to its customers, without having to keep the financial capital to back those promises.

But it was Brown's Treasury that was responsible for the insurer's regulation in the two years leading up to its collapse in December 2000, and who also failed to take appropriate action to mitigate consumers' losses after the event. More to the point, it is Mr Brown who will be seated at the head of Government when the report is published next week.

So what happens now? In any respectable democracy, you would hope that the Government would listen to the conclusions of its own independent regulator, apologise, and then get to work on finding the money as soon as possible for those who have lost out. Sadly, however, humility has never been Mr Brown's strong suit.

More likely, we will see an arrogant rejection of the Ombudsman's findings and an attempt to kick the report into the long grass – just as we saw with the Ombudsman's report into the occupational pensions scandal two years ago, where 125,000 people lost some or all of their company pension savings. That report was not so very different from this one. Once again, the Ombudsman found the Government guilty of maladministration, and once again, it recommended compensation.

However, there was one crucial difference. Back then, such a damning report by the Ombudsman, followed by such a swift brush-off by the Government, was pretty much unprecedented. In the months that followed, angry select committees criticised the Government for brushing aside the conclusions of such an important public body, while a judicial review of the Ombudsman's report upheld her conclusions and eventually brought enough pressure to bear on the Government that it was forced to meet the demands of the pensioners.

This time round, all of that is fresh in the memory, and politicians are in no mood to let Mr Brown hijack the workings of democracy yet again.

Furthermore, having seen how her occupational pensions report was treated, the Ombudsman has ensured that her new report is bulletproof – tough enough to stand up to any judge if the Government tries to play the same funny games as it did last time, two years ago.

So, in answer to my question – what happens now? – I'm really not sure. What I hope happens, however, is that MPs from all parties have the resolve to ensure justice is done. Although £4bn sounds like a lot of money at a time when the Government is already presiding over a £7.5bn black hole in its books, it is not so much when broken down on an annual basis.

Some 30,000 of those affected by the Equitable crisis have died over the past eight years. Many of them were forced to live out their last few years on meagre pensions. Fifteen more die every day. If Mr Brown refuses to step up and act responsibly this week, he must be forced to.

An alarming disregard for the Parliamentary Ombudsman

David Budworth, The Times 12th July

And so the Equitable Life debacle goes on. Next week Ann Abraham, the Parliamentary Ombudsman, will publish her much delayed report into the near-collapse of the life insurer. She is expected to recommend compensation for more than a million policyholders on the basis that the Government stood idly by as Equitable headed to the brink of financial ruin.

Despite her persuasive arguments, there seems little chance of Gordon Brown paying up. Ministers ignored Mrs Abraham two years ago when she called for redress for people who had lost their pensions. And they look set to thumb their noses at her again.

Some of you may agree that the Treasury should not use taxpayers' money to bailout policyholders. But the Government's blatant disregard for the ombudsman should still cause you concern. What is the point of the watchdog if those in power can ignore it at will? All it does is confirm the view, which ministers are so keen to dispel, that there is one rule for them and another for the rest of us.

Equitable ruling will tax us all

The Guardian, Patrick Collinson, July 12, 2008

Do Equitable Life's well-heeled customers really deserve billions of pounds in compensation from the taxpayer as parliamentary ombudsman Ann Abraham is likely to recommend next week?

Media reports have focused on the "damning" evidence of "maladministration" in which the "victims" have lost "as much as half" of their pensions and savings.

That's probably all true. Yet millions of customers of pension companies have received payouts which are, if anything, worse than those of Equitable Life. Will they get compensation? No chance. But there is a good chance they will have to cough up, via taxes, to bail out Equitable policyholders who did rather better.

It's curious how so little attention has been paid to the actual outturn of Equitable policies. This year an Equitable endowment holder who paid in £50 per month over the past 25 years would have got a payout of £36,572. Not great, but better than anyone who bought a policy at Britannia Life, Colonial, Provident Mutual, Sun Alliance or Winterthur. Indeed, the end result for Equitable policyholders is only a little short of the amount industry giant Standard Life is paying out.

It's the same story in pensions. Take a look at the figures from Money Management magazine, the home of the most respected industry surveys.

An Equitable customer who paid £200 a month into a pension plan over the past 20 years will have seen it grow into a pot worth £90,210 this year. That's a long way below the best - but also a lot better than the worst. The wooden spoon goes to the poor customers of London Life, which after taking the same amount of money turned it into £75,612. Yet it is Equitable's customers who are demanding vast amounts of compensation, paid not from corporate coffers, but from the pockets of ordinary working people.

The beneficiaries will be the lawyers, doctors, dentists and, dare I say it, journalists and media folk who were the typical customers of Equitable. That may also explain why you hear so much bleating about Equitable.

You may recall Equitable went under because it failed to set aside cash for guaranteed annuities that had been set at optimistic interest rates. Maybe regulators should have spotted its dangerously low reserves. But by mid-2003 virtually every insurance company in the UK was technically bankrupt and receiving "waivers" from the FSA.

There are lessons to be learned from the Equitable Life debacle. But there's no reason why you and I should be paying for it.

Swiss Re eyes £7bn Equitable Life fund

Financial Times, by Andrea Felsted, July 11

Swiss Re is among the bidders eyeing Equitable Life’s £7bn with-profit fund, which is up for sale in what is expected to be the final restructuring of the troubled mutual.

The world’s biggest reinsurer is competing against Prudential, the UK life assurer, which is among those looking at Equitable’s closed fund.

Equitable’s fate is expected to come under the spotlight again next week, when its near-collapse is revisited with the publication of a long-awaited report by the Parliamentary Ombudsman into possible regulatory failure over Equitable.

Equitable put what is left of the mutual up for sale earlier this year, and discussions have begun with interested parties. However, people involved in the process do not expect an outcome until the third quarter of this year.

Swiss Re declined to comment on whether it was interested or not.

It pioneered the practice of acquiring life assurance funds that no longer write new policies, but in recent years has been eclipsed by entrepreneurs Clive Cowdery and Hugh Osmond.

Swiss Re also lost out two years ago on taking on £4.5bn of annuity contracts from Equitable.

Some analysts expect Equitable to be carved up, rather than sold as a whole, although insiders believe a sale of the entire with-profit fund should not be ruled out.

Swiss Re’s interest comes ahead of what is expected to be a damning report from the Parliamentary Ombudsman.

Ann Abraham, the Parliamentary Ombudsman, is expected to find government regulators guilty of maladministration, and recommend that policyholders who lost out be compensated, according to people familiar with the report.

Ms Abraham will point to a string of regulatory failings as far back as the end of the 1980s through to December 1 2001, when the review period ends.

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

The Equitable Members Action Group (Emag), an independent association of Equitable members and policyholders, plans to instigate a judicial review if Ms Abraham’s calls for compensation are rejected by the government.

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

Equitable was closed to new business in December 2000, after it lost a House of Lords ruling over its treatment of certain with-profits policyholders.

Equitable sufferers face a long, hard slog


Equitable life policyholders have gone long enough since the implosion of the business seven years ago without getting excited now about suggestions that the Government might compensate them for their losses.

The hope has come with the imminent publication of a 3000-page report by the Parliamentary Ombudsman, Ann Abraham, which is reported to say that the shoddy way in which the insurance group was regulated amounts to maladministration - and by implication that Government bears some responsibility for the collapse.

If this is indeed the verdict, it does not mean policyholders will automatically get some money. the same Ombudsman found a couple of years ago that Government bore some responsibility for the losses of employees whose pensions disappeared when their employers collapsed - but the Government brushed that aside, and bitterly resisted campaigners every step of the way in their battle for compensation.

Equitable policyholders may have right on their side, but they too face a long fight to turn that into money.