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: 14/11/2008 - Ian Cowie in The Telegraph on PASC

14 November 2008 - Ian Cowie in The Telegraph on PASC

Ian Cowie, Daily Telegraph 14th November, 2008

“The Chancellor must do right by Equitable Life

A decade after this newspaper sounded the alarm at Equitable Life and eight years after that grand old life office slipped below the waves, the authorities are still rearranging the deck chairs deep on the ocean floor.

It's been a great earner for lawyers but a disaster for savers. The good news – and I must be careful not to raise false hopes here – is that a sense of urgency seems to be emerging from the latest team sent to investigate this scandal: the House of Commons Public Administration Select Committee.

I know because of what I heard after they summoned me to give evidence this week. Nobody in their right mind enjoys being grilled by a Select Committee but I was impressed by most of the MPs' evident desire to get at the truth.

Better still, after the meeting "sources close to the committee" – yes, I'm afraid that everybody reporting from Westminster is reduced to that sort of gibberish – indicated strongly that they are fed up with the way the Government seems determined to delay the inevitable.

For those of you lucky enough not to be among the 1.5m savers who invested with Equitable before it went belly up, a backstory may help. But please don't turn away now because what the Government does next will affect us all.

Britain's oldest insurance company (founded in 1762) trumpeted the fact it paid no commission to independent financial advisers (IFAs) – despite motivating its own salesmen with bonuses – and regularly used Department of Trade statistics in its adverts to show that it had the lowest cost to sales ratio of any insurer.

For many years, Equitable distributed more of the investment returns from its with-profits fund to policyholders than other insurers. While boring rivals held back some returns in good years to boost payouts in bad times, Equitable made a virtue of throwing off cash. No wonder intelligent people – including judges, accountants and doctors – who felt no need to talk to an IFA, flocked to join this smart self-selecting club.

Only the actuaries Equitable employed to run its profoundly opaque activities and the regulatory authorities could know that it was an over-promised fund. Beneath the surface, this fabulous ocean liner was fatally flawed. In particular, it sold pension savings plans with guaranteed annuity rates (GARs) promising savers double digit incomes when they retired. As interest rates elsewhere fell, these GARS looked increasingly attractive – but also became ruinously expensive for Equitable to deliver.

When its highly paid mathematicians came up with the brilliant solution of punishing policyholders who insisted on receiving their GARS with a commensurate cut in with-profits payouts, the personal finance sections of all the serious newspapers cried "foul". The insurer responded that it had more actuaries than God and it would see anybody who disagreed in court. It followed up with an infamous letter to policyholders, urging them to "ignore misleading press comment".

Serial litigation ensued until the House of Lords put an end to this nonsense – and Equitable – with a natural justice ruling that it should honour its promises and deliver what it had guaranteed. I transferred a modest personal pension elsewhere – and reported that fact in the newspaper – shortly before the insurer imposed exit penalties on withdrawals. Meanwhile, the regulators threatened IFAs with disciplinary action for urging anyone to switch their money to a safer home.

Eight years later, an estimated 30,000 Equitable savers have died waiting for redress, including, to declare an interest, a close friend of my family. Justice delayed really is justice denied when it comes to older savers whose trust in financial institutions and regulatory authorities has been cruelly betrayed. Then, in July, Ann Abraham, the Parliamentary Ombudsman delivered a 2,819 page report: "Equitable Life – a decade of regulatory failure".

This described government restrictions on earlier inquiries as "iniquitous and unfair"; called the Department of Trade's oversight of Equitable "passive, reactive and complacent"; the Financial Services Authority's regulatory efforts "largely ineffective and often inappropriate"; identified 10 major areas of "maladministration" and said policyholders were entitled to a "justifiable sense of outrage" plus, more importantly, compensation.

Phew. Apart from that, Mrs Lincoln, what did you think of the play? The Treasury, eager to get away on its summer hols, promised to respond in the autumn. The Daily Telegraph organised an online petition which 7,000 readers signed. You can too; see address below. Now, in mid-November, I understand that the Select Committee is minded to view autumn as ending this month. Unless it hears from the Treasury within the next fortnight, it will add its report to the pile on Chancellor Alistair Darling's desk.

I hope they pass on what I told them about the immeasurable damage done to public confidence in saving by the Equitable scandal. Its victims were not reckless speculators in some failed dotgone stock but prudent souls who chose a long-established life fund. But, unlike credulous folk who chased the highest returns all the way to Iceland, the British Government has ignored their pleas for help.

No wonder the savings ratio in this country has collapsed during the decade since Equitable tried to wriggle out of its promise to policyholders from about 10pc of household income to nearer 2pc now. Savers are on strike because they can see prudence does not pay. The Pension Protection Fund reported this week that the shortfall between what companies are committed to provide in pensions and the assets available to honour those promises has risen to £97 billion.

Meanwhile, actuaries Watson Wyatt calculate that pension rights already accrued by public sector workers exceed funds to pay them by £1,000 billion. That's £1 trillion extra tax our children will have to pay in the decades ahead, as I may have pointed out here before.

Perhaps it is asking rather a lot of the Government to put right the wrongs of Equitable when it is running the biggest over-promised fund of all. But, just as eventually happened with the bust company pension victims, there is growing cross-party awareness that the cost of compensation must be weighed against soaring state benefit bills unless confidence can be restored. People can and will opt out of saving but they cannot opt out of growing old.

So I simply refuse to believe a wicked Westminster whisper that Mr Darling plans to use his Pre-Budget Report on Monday week to claim he cannot help the Equitable victims because he has blown too much bailing out the buy-to-let brigade at Northern Wreck and Badly & Bungled or unfreezing those distant deposits in Iceland.

Help Mr Darling do the right thing by joining our campaign for justice by emailing us at equitable@telegraph.co.uk