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


Quotes - 2006

  • “Farepak victims must take at least some of the blame

    ……When it comes to deciding who to trust with our savings we must never lose sight of two inescapable truths: companies go bust and money corrupts. The most unlikely individuals, from vicars and church wardens to headmasters and other pillars of the community, have all in their time run off with the raffle money. There is something about the green stuff that can turn an angel into a devil….

    Personally, I have found the entire Farepak saga unedifying from start to finish. The individuals concerned made a terrible investment. When it turned out to be just as bad as could have been predicted, they blamed anyone they could find for their mistake, without ever conceding their own folly was partly responsible.

    They also seemed to take it as their right that the rest of us should bail them out. Thousands were happy to put their hands in their pockets and contribute towards the £6m rescue fund. Who can turn their back on a neighbour at Christmas? But we were all innocent bystanders……….

    Most distasteful of all has been the sight of Labour MPs running round blaming all and sundry, demanding cash from all kinds of innocent parties, calling for boycotts of institutions and engaging in the most offensive blackmail.

    These are precisely the same MPs who care so much for the victims of financial scandals that they sat through debate after debate on the pensions crisis and the Equitable debacle with their lips firmly zipped up.

    The millions who lost cash in these scandals were not handing over money to dodgy savings clubs, but trusting in government regulation. Various reports have pointed to its guilt and called for compensation. So where were the backbenchers then?

    Shameless doesn't even begin to describe it.”

    Teresa Hunter in Scotsman on Sunday, 10th December, 2006

  • Key Equitable documents may assist ombudsman

    Key documents released recently by the Treasury could provide the Parliamentary Ombudsman with ammunition for a damning verdict on the regulation of Equitable Life.

    The release of a huge cache of hitherto unseen correspondence between Equitable and its regulators in the build-up to its near-collapse in 2000 has forced the Parliamentary Ombudsman, Ann Abraham, to delay her report for six months.
    Equitable's chief executive, Charles Thomson, told MEPs in Brussels yesterday: "I haven't seen the material, which includes correspondence the company got from the government actuary's department and the regulator. It will be fascinating to see the ombudsman's report and the degree of questioning that went on."
    Paul Braithwaite, secretary of Equitable Members' Action Group (Emag), commented afterwards: "If this was just a snow of paper, the Ombudsman would have soon cut through it. One has to assume there is some important material here."

    …..EMAG, which brought about the European inquiry by petitioning the Parliament two years ago, says its is hopeful that Abraham's verdict on Equitable will be "even stronger" than her critical report on pensions.

    Evidence submitted to yesterday's meeting by The Herald was highlighted by the Tory MEP Sir Robert Adkins, who asked Thomson whether his board had colluded with the regulators to minimise the payment of compensation, in defiance of policyholders' legal rights……

    Thomson said Equitable had been heading for meltdown in 2000 even if it had not lost a critical court judgment. "It should have been increasingly obvious to people that there was going to be an unfortunate outcome. Had it not been brought to a head by the House of Lords judgment, the fall in economic values in 2001-03 would have brought matters to a head in a way that would have caused serious difficulties to the company."

    Asked by MEPs whether Equitable's former management had attempted to deceive the regulators, Thomson said: "There is actually terribly little evidence that what they did was done with malice or greed or any malevolent intention. They appear to have thought they were running the business very efficiently. They were deluded."

    Mairead McGuinness MEP, chair of the committee of inquiry, asked Thomson why in that case the new management had pursued the former directors in an ill-fated court action. Thomson agreed that it had been unsuccessful…..

    SIMON BAIN in Brussels November 24 2006

  • (All from Sunday 12th November, 2006 about Farepak)

    "More Christmases to come without a pension pot

    The collapse of Farepak is undoubtedly traumatic for those families who saved for Christmas, and now face a bleak festive season. The Government has set up a fund, MPs are donating a day's pay and the Chancellor is quick to offer sympathy.

    This is all laudable. But it will be watched with bitterness by the 125,000 people who have lost more than one merry Christmas as they face a retirement full of bleak winters after losing their pensions. This week the Government rejected calls from the Public Administration Select Committee of MPs to pay compensation to these workers. The select committee was backing an earlier Parliamentary Ombudsman report into the lost pensions, which ministers have ignored, breaking with decades of parliamentary tradition.

    Where are the MPs speaking out about this abuse of democracy? Where are the MPs donating their pay to this cause? Where is Gordon Brown?"

    Antonia Senior in the Sunday Times

    ".. Even when the Parliamentary Ombudsman tells the Government that it has behaved shamefully over the treatment of those whose pensions have vanished as companies have collapsed, ministers bat away this inconvenient finding as if the author were a nuisance caller trying to sell double glazing.

    Instead, in a shamelessly populist gesture, trade minister Ian McCartney suggests that MPs should donate a day's pay to those who have lost their savings in the failed Farepak Christmas club. The Farepak scandal is not the Government's responsibility; the impoverished pensioners are, but that does not concern the man who put his name to the proposed ennoblement of the Labour lenders.

    Perhaps, as he tried to appear as Father Christmas to the disheartened Farepak savers, Mr McCartney had forgotten about all those pensioners...."

    Patience Wheatcroft in the Sunday Telegraph

    What about pensioners?

    Note the eagerness among MPs to help the 150,000 victims of the Farepak debacle. Ian McCartney, the consumer minister, describes it as a "national emergency". Even Gordon Brown has pledged a day's salary. Contrast that with his response to the 125,000 people who've lost their company pensions – not to mention the 1m Equitable Life victims.

    Liz Dolan in the Sunday Telegraph

  • Ministers lament Farepak but ignore pensions fiasco: “It was most interesting to note that the Minister for Consumer Affairs, Ian McCartney, has described the collapse at Farepak, where 150,000 people have lost around £500 to £1,000 in toto as a "national emergency" and said "Let's get resources to people who need them."

    MPs have been asked, and some such as Peter Hain have agreed, to give a day's pay towards a fund for savers. Gordon Brown has stated: "It is terrible what has happened to people who have saved through this scheme - to lose your money and therefore vouchers before Christmas, when you have been banking on that for your Christmas presents, is outrageous."

    In stark contrast to the Farepak savers, virtually nothing at all has been done for the 120,000 savers who have lost their occupational pension over many years (despite a ruling from the Parliamentary Ombudsman that the Government was negligent), or for the very large number of savers at Equitable Life who have lost far more substantial sums than Farepack savers.

    One could rephrase the Chancellor's comments thus: "It is terrible what has happened to people who have saved through these pension schemes - to lose your money and therefore pension when you have been banking on that for your retirement, is outrageous." However, he has not, of course, said this. Indeed he has been conspicuously silent over many years on the issue of lost pension savings.

    Whilst I am very happy that Farepak savers will get back some of their savings, the whole approach from the Government represents a cheap political gimmick and smacks of massive hypocrisy.”

    A letter from Dr Andrew Goudie, published in The Independent 10th November, 2006

  • “Inequitable Life – again

    Equitable Life management yesterday ran into a fresh wave of criticism after the company admitted it had wrongly restricted pension options for 700 policyholders who retired as much as six years ago. The policyholders have been told this week, out of the blue, by Equitable, headed by Charles Thomson, that "a recent review of the terms applying to your policy has revealed you could have taken your pension benefits in a different format from that chosen, without losing the benefit of the guaranteed rates".

    The policyholders affected, who retired between July 2000 and February 2002, were told at the time they could not opt for a spouse's pension or an annual increase to their income without losing the right to the guaranteed annuity rate which was upheld by the House of Lords in July 2000.

    David Arthur, a retired Borders professional, who received the letter this week, said: "Although they say 'this letter is not to be construed as an admission of fault or liability by the society', what they now say clearly indicates their actions back in 2000 were wrong."………………..

    Paul Braithwaite, secretary of the Equitable Members' Action Group (EMAG), said: "During Charles Thomson's stewardship, Equitable's with-profits fund has fallen in value from £26bn to just £9bn yet, despite his obscene £1m pay packet, it appears administration today is no better than when he took over nearly six years ago."………………….

    The Herald revealed earlier this year that Equitable, just weeks after making a "final" offer of £500, paid out £82,000 in compensation to a Lanarkshire professional who refused to be fobbed off by four years of delay in dealing with his complaint. The society's explanation was that it had "looked at it again"……..

    See Simon Bain, The Herald October 12th 2006

  • “Equitable eyes sale options but no deal imminent.
    Equitable Life saw its financial position improve in the first half of 2006, but after selling off a key book of annuities in May, the UK insurer said it was uncertain it could reach a deal for the rest of the business.

    Britain's oldest mutual insurer signed a deal in May to transfer a £4.6 billion-pound book of non-profit annuities to Canada Life, a unit of Great West Lifeco, allowing it to cut its risk profile.

    That agreement is expected to be completed in 2007 and the insurer said on Thursday it was working on options for its key £10 billion-pound with-profits fund.

    But Chief Executive Charles Thomson warned that a deal for those annuitants, which have seen income decrease over the years, could fail to materialise despite a growing market interest in closed life funds.

    "We talk to people all the time but whether it leads to anything (is uncertain). The reality is deals may be difficult to do and may take a long time...the answer may be sometime, possibly never," Thomson said in a telephone interview.

    Regulatory restrictions have kept Equitable Life's with-profit fund heavily invested in fixed income assets, with only a small proportion of its funds invested in equity or property assets, where returns have been higher.

    But weak bond markets meant that in the six months to June, gross return on Equitable's with-profit assets fell to 0.6 percent from 5.3 percent in the same period a year ago

    "We may not be able to fix that, but if they were in a stronger with-profit fund than ours there would be the potential for higher investment growth," Thomson said………

    But the insurer said its improved finances meant it could be able to ensure a stable and secure run-off of its main fund.

    Equitable Life said it was stronger than at any time since 2001, with its key measure of solvency -- excess realistic assets - up 17 percent to £786m pounds over the half year.”

    Reuters, Clara Ferreira-Marques, 28th Sept, 2006

  • "Comment: Why torpid Tories must share blame

    Did you know that the good old taxpayer has put more money into John Prescott's bulging pockets than the Financial Assistance Scheme has distributed to victims of the pensions crisis since this pathetic excuse for a statutory safety net was lashed together? No, I thought not.

    On Sunday the Public Administration Select Committee will add its two penn'orth to mounting criticism of the way this Government has destroyed thousands of people's lifetime savings. The committee will support an earlier, authoritative report by the Parliamentary Ombudsman, Ann Abraham, on what the Government did wrong and why it must pay compensation…………….

    Tomorrow's report by the Select Committee into the "constitutional implications" of that outrageous insouciance may make it more difficult - even for this shameless administration - to brazen it out.

    Having said all that, ignoring the recommendations of the Ombudsman seems to be habit-forming. Back in February, 2003, Ms Abraham told the Government that tens of thousands of vulnerable old people were being wrongly refused help with the cost of long term care fees. But widespread misuse of means test continues as if the Ombudsman had said nothing. Since then, perhaps a quarter of a million family homes have been sold to meet costs that should rightly have been borne by the State………….

    Nor is it entirely fair to blame the Government for all this. Those in power, after all, must make some very difficult decisions. No, the torpid Tories must bear their share of the blame for what is going on here. If we had a decent Opposition, we might have a better Government. Their failure to oppose has helped to support the arrogant governance we are suffering today.

    Don't take my word for it. Nearly 20 years ago, a Conservative administration tried to ignore an earlier Ombudsman's recommendation that it should compensate victims of the Barlow Clowes scandal. They had sent their money offshore and so were much more culpable than today's victims of collapsed company pensions.

    Here's what the Shadow Chancellor at the time told the House of Commons:

    "Many pensioners have lost their life savings. Why have we had to rely on the Ombudsman to confirm the mismanagement, maladministration and incompetence that was widely known about more than a year ago?

    "Does the Secretary of State agree that, while the need for compensation is agreed, the reason for the payment is not the fecklessness, gullibility or incompetence of the small investors but the fecklessness, gullibility and incompetence of the Government who, for months and years, ignored all the warnings that were available to them?"

    Phew. Who was that young firebrand? Step forward, Gordon Brown. While it would be too much to hope today's Chancellor might retain his youthful lust for justice, it would be good to see some of the current crop of Opposition MPs emulate those emotions. At least until they get their hands on the levers of power……...”

    Click here to read more

  • Ombudsman: pensions crisis looms
    Ann Abraham, the parliamentary ombudsman, has launched an unprecedented attack on the government for rejecting her highly critical report urging compensation for 80,000 victims of pension funds that collapsed due to government maladministration. In an explosive memorandum yesterday to the Public Administration Committee, the ombudsman accused the government of misrepresenting her findings and concluded: "I am concerned that the government's response to my report, together with what appears to me to be an emerging attitude amongst government officials and ministers in relation to my findings of maladministration, has serious implications for the constitutional position of my office."

    …………. Ministers delayed publication of the pensions report last year, and then peremptorily dismissed its findings by claiming that it would take £15bn of taxpayers' money to compensate the victims. But when the formal response of the Department of Work and Pensions was published earlier this month, it emerged that the real cost would be closer to £3bn spread over decades.

    Abraham's evidence says: "My report does not suggest that the redress for the undoubted injustice suffered by many thousands of pension scheme members should be paid for wholly by the taxpayer. However … only the government can organise a proper remedy for the losses sustained by those who complained to me."

    Abraham was yesterday in attendance at the committee as it grilled the work and pensions secretary John Hutton, who resolutely refused to concede a point, despite its chairman, Dr Tony Wright, opening proceedings by asking Hutton "why the government had triggered a constitutional crisis".

    ……………..In no previous case had the government both rejected findings of maladministration and refused to consider righting the injustice sustained, nor had an injustice remained un-remedied in any previous case, which meant there was "no precedent for the government's response to my report", Abraham said……………

    The DWP "continues to assert that it can be the final arbiter of complaints about its own actions", a position which "goes to the heart of the system of independent scrutiny of executive action that parliament has established" and which undermined trust in government.

    Simon Bain in The Herald 29th June, 2006

  • Equitable stokes the final fire sale

    ……………In what has all the hallmarks of a multibillion pound closing down sale, the scandal-hit insurer has been selling off the family silver. Last month, it offloaded a £4.6bn chunk of its empire.

    That record-breaking deal - which saw the company announce it was transferring 130,000 non-profit pension annuities (policies that provide a guaranteed income) to Canada Life - has been widely heralded as paving the way for the possible break-up of the insurer.

    …….So, after 244 years of serving the great and the good - latterly becoming a byword for scandalous financial ineptitude - is the endgame approaching for the world's oldest mutual insurer?

    ………In truth, the great Equitable sell-off began back in 2001, when its fund management arm, administration systems and sales force were bought by the Halifax for £750m, but effectively had to be put on ice while the insurer set about making its finances more stable.

    ……..Paul Braithwaite of Equitable Members Action Group (Emag) says it seems to be a case of "everything must go" at the insurer. "They are literally ripping up the decks."

    So what exactly is left? Aside from the with-profits fund, not a lot. Equitable rents part of an office in London and premises in Buckinghamshire. It employs just 26 staff, a far cry from the 2,000 or so in its heyday.

    In terms of what happens now, offloading the annuities makes it much more likely that someone will want to acquire the with-profits fund, but Equitable's directors don't want members to get their hopes up. There are a number of obstacles to a deal. It would need to be a win-win for both parties. "Someone isn't going to take it over for charitable reasons. How are they going to make money and also make it better for policyholders?" asks one insurance expert.

    …………The board is likely to look most favourably on a potential buyer who is able to give some investment freedom to the fund. Just 5% of policyholders' money is invested in equities, which means the prospects for future investment growth are very limited.

    Finally, a deal would require the approval of members, who are the owners of the fund - and they are a formidable and unpredictable lot.

    Rupert Jones in the Guardian 3rd June, 2006

  • Equitable bosses told to quit over legal 'blunder'
    The chairman and chief executive of troubled mutual Equitable Life faced calls to resign at a stormy annual meeting in London over their decision to abandon £4bn lawsuits against the society's former directors and auditors………….

    Charles Thomson, chief executive, and chairman Vanni Treves faced a series of questions from disgruntled policyholders yesterday. One said he was angry over the way the case had been handled: "The legal advisers we had should be fired, the chairman and chief executive should resign as I reckon they have cost the society £300m."

    Another policyholder accused the board of having wasted members' money, suggesting the cost "should be borne by the board" and called its role in the litigation a "big blunder".

    The board was also accused of "timidity" in its decision to end the case but Mr Thomson insisted "it was only when we realised that we would not succeed that we abandoned it".

    Policyholders also expressed anger that Mr Thomson still received 60% of his maximum performance-related bonus last year.

    One audience member shouted: "It should have been zero". Another policyholder suggested: "Surely with this reduction in performance, he should be paying the society to retain him." Yet another called to Mr Treves: "It's not a joke, get the smile off your face."…………….

    There was concern over Equitable's decision last week to transfer a £4.6bn book of non-profit annuities to insurer Canada Life.

    Mr Treves said the process was "fiendishly complicated" so the final stage may not happen until late this year or early next year. However, he said the financial risk had already passed to Canada Life.

    Mr Treves revealed that HBOS, which previously administered the assets now transferred to Canada Life, had "agreed to release us from our commitment to them". But in response to a policyholder's question, he admitted: "We do have to pay compensation but it is fair compensation. There is no net cost to policyholders because over the remainder of the contract we will be paying them less."

    Caroline Muspratt, The Telegraph 18th May, 2005


    The transfer of Equitable's £4.6bn non-profit annuity book will not hasten the departure of Vanni Treves, Equitable's chairman, or Charles Thomson, its chief executive, they insisted yesterday, writes Andrea Felsted.

    Mr Treves and Mr Thomson have been criticised for their handling of multi-billion pound legal cases brought by Equitable against its former auditor Ernst & Young and 15 former directors. Both cases settled without recouping a penny for policyholders and leaving Equitable shouldering a £45m legal bill.

    Last year, Mr Thomson indicated that he and Mr Treves could step down towards the end of this year, or at a point when their job of restructuring the mutual was largely complete.

    However, yesterday Mr Thomson said: "The job is not finished and therefore it seems appropriate we are still here for a little while longer."

    He added that it could take between six and 18 months to complete the transfer of the non-profit annuity book.

    However, Mr Thomson and Mr Treves are expected to be further berated at Equitable's annual meeting on Wednesday.

    Paul Braithwaite, general secretary of the Equitable Members Action Group, said John Newman, its deputy chairman, was standing as an independent candidate to the Equitable board again this year.

    "The signs are he is going to get considerable support," said Mr Braithwaite.

    Financial Times,Andrea Felsted 12 May, 2006

  • “Equitable Life's future remains up for grabs
    Six years after its near collapse, Equitable Life still attracts headlines as more than 600,000 policyholders with the world's oldest mutual insurer wonder what the future will bring.

    Most of those affected are probably over 50. Equitable generally targeted more affluent customers - so people were older rather than younger when they opened policies. And age was an important issue in 2000 when Equitable nearly went under: younger people were advised to take their funds to another insurer, who could give them decent long-term returns. Older people, who had shorter periods to run on their policies, were more likely to stay put.

    Equitable is still high on several agendas. A committee of Euro MPs is looking into the British government's handling of the regulatory issues - its preliminary report is due in mid-May, with a final version in early 2007. The Parliamentary Ombudsman, Ann Abraham, is looking into whether the government was guilty of maladministration in its handling of the issue. 'We think she is the best hope for policyholders hoping to get government compensation,' says an Equitable Life spokesman. 'She can recommend that compensation be made.' (She was, however, famously ignored recently when she urged the government to compensate members of various failed final salary pension schemes - and the government could choose to ignore her over Equitable, too.) Abraham is expected to report by the end of 2007.

    Also in progress is the Financial Ombudsman Service's adjudication on about 1,000 cases where policyholders claim they were mis-sold Equitable plans. Many of these hinge on timing. Plans sold after March 1998 were more likely to have been mis-sold, says the Ombudsman, as by then Equitable management should have had a good idea of the organisation's financial difficulties……….”
    Neasa Macerlean, The Observer April 30, 2006

  • Pensions refusal by ministers to face legal test

    A group representing 85,000 pension scheme members who lost retirement savings when their employers became insolvent plans to seek a judicial review of the government's refusal to honour the Parliamentary Ombudsman's recommendation that each member receive full restitution of losses and additional compensation.

    Ros Altmann, a specialist in pensions economics who was independent adviser to the group, said that offers of pro bono legal advice had been received from law firms that had expressed indignation at the government's refusal to accept responsibility for badly flawed pensions policy…………

    Separately, Ms Altmann said she would be presenting a case in Brussels on April 25 to the European Parliamentary Petitions Commission on behalf of Maurice Jones, 66, a sole, representative claimant. The group will ask Brussels to force the UK to comply with European pensions legislation.

    "Government is ignoring the decent, hard-working citizens of this country and treating people who play by the rules and take their responsibilities seriously with utter contempt," said Ms Altmann, explaining why the group was pressing on in its quest for restitution. Ms Altmann said that several of those who had lost their retirement benefits had already died.

    The government's Financial Assistance Scheme, intended to provide some compensation to those who have lost out, falls far short of what is needed to provide restitution. The FAS has provided aid to fewer than 100 people, some of whom have lost not only their occupational pension benefits but their entitlement to certain state benefits as well.

    In March, the office of the Ombudsman released a 254-page report, which uncovered evidence of suffering, distress and uncertainty about the future among pension scheme members and their families, who had relied on government information when making choices about their pension provision.

    The investigation found ministers ignored advice from the actuarial profession that the standards it set for scheme funding were too weak to protect pension promises.”

    Norma Cohen, Financial Times 18th April, 2006

  • “The Prime Minister says we can't compensate because it would cost £15billion and that is just too much money. How can we pay this kind of sum?

    Dr.Ros Altmann comments: Replacing the lost pensions would cost no more than £100-£150million a year, index-linked, for 40 or 50 years, and does not require billions of pounds. Last year alone, officials overpaid £130m in pension credit and this sum was easily absorbed in the DWP budget. £100-£150million a year is easily affordable, but the political will is not yet there. The £15billion number is a scare tactic on the part of the DWP, to try to make people believe we cannot do this.

    Margaret Hodge was even quoted as saying this compensation would be 6p on income tax. That is complete nonsense, since it would mean a cost of £15billion a year! In any event, these are pensions, and do not need to be paid for at once, but budgeted for over time. Furthermore, the DWP has not even be able to substantiate its figure. It has made two attempts at producing some figures, neither of which has actually managed to justify this so-called cost. If the DWP had really worked out the cost of £15billion, it would have been able to justify that by now, so the assumption must be that it has thought of a number and is now trying to find a way to justify it after the event!”

    A short extract from Dr Ros Altmann’s response top the government’s rejection of the PO’s report: “Trusting in the pensions promise.”
    Read Dr Altmann’s detailed paper (PDF)

  • Chance to make up for the inequitable life.

    The Institute of Actuaries has launched a last minute appeal to save the Equitable Life achive, dating back to 1760, which “illustrates the first application of actuarial science to life assurance”. The Institute wants to put on show a record of the time when Equitable’s actuaries knew what they were doing. But with only a few days to go it has raised only £57,000 of the £80,000 required to save the archive from auction.

    A sympathetic policyholder, one Paul Braithwaite has come up with a solution. He writes to the Institute:

    “I am supportive of your endeavour to keep the ELAS archive together and accessible. The obvious source of the residual £23,000 shortfall is Mr Charles Thomson. He joined The Equitable Life from unemployment in January 2001 on about £250,000 per year as finance director.

    “Now, five years later, as CEO he has enjoyed average earnings, including bonuses, of at least double that and a reported £1m in 2005. All this whilst policyholders fled the with-profits fund in droves, leaving hefty MVAs (market value adjustments) to keep the Society solvent and now only one third the size of when Thomson joined.

    “What enormous good fortune Charles Thomson has had. Surely he could be persuaded to give something back to the profession that has SO enriched him?”

    Karl West in Business Diary, The Herald 1st April, 2006

  • Equitable Life returns solid, stable but unspectacular

    Equitable Life's with-profits fund, held almost entirely in bonds following the society's near collapse five years ago, made a weak 5.6% net return in 2005, compared with returns of between 16% and 21% for its former competitors in the pensions market.

    The society yesterday reported "another year of solid progress in bringing stability back to the society", adding it was "confident that, with careful management, the society can operate securely as a closed fund, paying policy benefits as they fall due".

    It admitted that: "even with our greater stability, a limited outlook is implied for policy returns because the fund remains primarily in fixed interest investments" and said it was "exploring options... which could improve longer-term prospects".
    Chairman Vanni Treves has dropped regular hints that bigger insurers have approached the society, particularly during the humiliating legal climbdown in the £3.7bn actions against its former auditors and directors last year.

    Yesterday's report, however, refers ambiguously to Equitable's "approaches" to the problem, and then to unspecified "discussions" of the issues, concluding: "It is by no means certain that any such discussions would lead to a positive answer."………

    It is understood that policyholder opinion is being canvassed by the society ahead of its annual meeting – usually a stormy affair – in May, and that one of the questions asks whether "policyholders would support a sale of the company if it meant higher returns".

    Meanwhile, Equitable has reported an apparent improvement in its solvency.
    It admits that its Fund for Future Appropriations, used as the measure of solvency hitherto, dwindles to zero on the new realistic reporting basis, from some £560m a year ago. However, it says the new key measure of solvency is excess realistic assets, which were only £455m a year ago but which have risen to a healthier £669m, or 6.6% of the surviving £10.1bn with-profits fund.
    It said with-profits pension policy values had been increased by up to 4.5% in respect of 2005, but with-profits annuitants with policy values higher than their guaranteed benefits would see 0.5% lopped off their policies each year for the next six years………………

    Equitable refused to back the Equitable Members' Action Group when in 2004 it asked for help to bring a case against the UK government to the European parliament………….

    SIMON BAIN in The Herald, 31st March, 2006

  • Nonsense and lies - Blair's answer to Abraham

    Guilty as charged - the stark conclusion of Ann Abraham, the highly respected Parliamentary Ombudsman. After an exhaustive 16-month investigation, she ruled last week that ministers did mislead the public over the safety of final salary pensions…………….

    This "injustice", concluded Abraham, resulted from "government maladministration". Whitehall departments, over many years, issued leaflets reassuring the public that final salary pensions were safe even if companies went bust………………

    New Labour has a well-deserved reputation for treating Parliament with disdain. But ministers plumbed new depths when, within minutes of publication, they "rejected" the Ombudsman's 254-page report.

    No matter that her inquiry was sparked by hundreds of complaints from concerned members of the public. No matter the gravity of her findings - that official information on pension security was "inaccurate, incomplete, unclear and inconsistent".

    No matter that she judged ministers to have acted against the advice of the actuarial profession when, in 1998 and 2002, they weakened the Minimum Funding Requirement, which was designed to make sure that final salary schemes were properly financed.

    No matter that she criticised the Government for ignoring repeated professional warnings to tell the public their pensions might not materialise. Clearly, the Treasury's determination to push workers into private schemes, so cutting costs to the state, outstripped any sense of fairness.

    Since Abraham reported, the Government has compounded its guilt by propagating two deliberate falsehoods. The first is that official leaflets gave only "qualified advice" and did not state that final salary schemes were safe. They were "for general guidance only", says Stephen Timms, the pensions minister.

    Nonsense. The advice was unequivocal. Take, for example, a leaflet published in 2000 by the Financial Services Authority, the Government's most important financial regulator. "Some types of employers' schemes," the leaflet said, "the ones called final salary schemes, give you a guaranteed pension"……………..

    The second falsehood - again, an attempt to discredit the Ombudsman's case for compensation - is to grossly overstate the cost. "We have been asked," Tony Blair told MPs last week, "to give a £15bn commitment".

    Again, this is nonsense. This figure appears nowhere in the Ombudsman's report - to claim that it does is deeply disingenuous. "We don't understand where Mr Blair got this estimate from," says my mole in Abraham's office. "It seems very inflated to us."………..

    Ros Altmann, another expert who campaigned for Abraham's inquiry, says even this is an overestimate. "It would be ludicrously bad value to buy annuities for these victims," she says. "Far better to use the assets left in the failed schemes to pay pensions on an ongoing basis".

    That would bring compensation costs down to £4bn over 40 years, says Altmann - and many pension professionals agree with her. So we're looking at £100m annually - or less than £2 per citizen.

    Given the importance of restoring public trust in pensions - and government advice on pensions - this annual cost, a fraction of the Treasury's £3bn contingency fund, represents exceptional value for money.

    "I must ask why we have to rely on the Parliamentary Ombudsman to confirm the Government's mismanagement, maladministration and incompetence." So said Gordon Brown in 1989. As shadow industry secretary, he was attacking ministers over the Barlow Clowes scandal - when, again, the Ombudsman blamed the Government for bust pension schemes.

    Back then, Brown railed against "the fecklessness, gullibility and incompetence of the Government, which for months and years ignored all warnings". Today, the chancellor presents himself as the future leader of our country. To be taken seriously, he needs - for once - to swallow his pride, admit that mistakes were made and implement Abraham's recommendations in full.”

    Liam Halligan, Sunday Telegraph 19th March, 2006

    There were several outstanding quotes of the week, all on the government’s astonishing dismissal of the PO’s report into failed occupational pensions, that it was difficult to chose. These are well worth reading:

    Paul Routledge in The Mirror 17th March, 2006
    Saturday Telegraph, by Ian Cowie, 18/03/2006

  • "One more heave for the Equitable boulder

    Heard the latest about Equitable Life?

    Readers: Not Equitable Life AGAIN? Can’t you give it a rest?

    I know what you mean. I feel like Sisyphus, condemned to push the same boulder up the same hill for eternity. But it has to be done.

    Readers: OK, but make it snappy. What’s happened now?

    The Parliamentary Ombudsman’s second report on the role of Government regulators, this time including the Department of Trade and Industry, the Treasury and the Government Actuary’s Department, has been delayed for the second time, probably until October.

    Readers: Another report? That makes five. Surely, there’s nothing more to say?

    Apparently, there is. Vital new evidence has been uncovered, and those involved have been given time to put their side of the story. Too much time, some say, given the new stuff emerged last year. Still, the delay’s good news for ministers.

    Readers: Why’s that?

    The PO’s separate report on occupational pensions is due on Wednesday. If Ann Abraham (the PO) finds the Government guilty of misleading people into believing their company schemes were safe, the Treasury could face an annual compensation bill of £100m for the next 40 years. If it’s also found guilty of regulatory incompetence at Equitable, the Government could face a further bill of up to £3bn. It would be handy not to have both announcements coming out just before the local elections in May, especially as a European committee is also amassing evidence of the failure of the UK regulatory system to offer sufficient protection to Equitable victims.

    Readers: So what are the chances of the PO forcing the Treasury to compensate Equitable victims?

    Difficult to say. The regulators certainly appear to have done a pretty lousy job. There’s good reason to believe Equitable’s liabilities weren’t properly covered in the 1990s, but the society was allowed to continue paying unsustainably high bonuses to attract huge amounts of new business throughout the period. The GAD (which is supposed to understand these things) got particularly jumpy at times, but only ever behind closed doors, and never to any effect.

    Abraham is the only architect of the various Equitable reports with the power to direct (but not force) the Government to pay compensation, But her previous report on the same subject back in 2003 offers no grounds for optimism. She chose to limit the investigation to one regulator – the Financial Services Authority, which didn’t exist until 1999 – and to a single “test case”, whose subject was never interviewed. The result was a whitewash. She could have achieved more by staying home and knitting blankets for refugees.

    Only after the Penrose report uncovered a wealth of disturbing facts in 2004 did Abraham bow to pressure and agree to try again.

    Readers: Can the European Parliament force the UK Government to compensate victims?

    No, but it can rubbish the UK’s persistent boasts that its regulatory system is superior to that of other European countries. The committee is sitting at the request of the Equitable Members Action Group (EMAG), which also played a vital role in getting Abraham to reopen her investigation.

    Readers: Lots of people suffered from the wider with-profits scandal. Why do Equitable’s policyholders think they’re so special?

    The regulators turned a blind eye to evidence of scurrilous goings-on at Equitable long before problems started to emerge at other life offices. Also, other companies at least appeared to have sufficient capital to fund liabilities, when Equitable was patently teetering on the edge.

    Readers: Thanks, Sisyphus. Hope the boulder gets to the top this time – and stays there.”

    Liz Dolan, Sunday Telegraph 12th March, 2006

  • "Watchdog's Equitable Life report delayed again

    A parliamentary watchdog's long-awaited report into what went wrong at Equitable Life and whether government departments were at fault, has been delayed and is unlikely to appear until October at the earliest. Campaigners said long-suffering policyholders would be "bitterly disappointed" to learn of the delay………..

    Ms Abraham's office has been investigating 18 accusations of regulatory failure. She originally indicated she would complete her investigation before the end of last year, and in October she said the report was due to be published by the spring of 2006. But she has now written to MPs to tell them this had not proved possible. The report would not appear before the summer parliamentary recess, and she would only say she expected to lay it before parliament before the end of 2006.

    Campaigners claim the delay is linked to demands by the government for more time to respond to potentially explosive new information uncovered by the inquiry team. A spokesman for the 15,000- strong Equitable Members' Action Group (EMAG) said it understood the investigation had revealed "vital new evidence not accessible to the general public that is of such significance that it should be incorporated, but the government is insisting it must have much more time to respond"………….

    Campaigners have pressed for an official bail-out, and the European parliament recently launched a formal investigation into the government's role in what went wrong. Last week, the committee of inquiry, made up of 22 MEPs, said it would be questioning government officials.

    Paul Braithwaite, general secretary of EMAG, said his organisation was "exasperated at being parried at every turn by the British establishment". "It's delay after delay after delay - presumably until we're all dead or gone away. Nevertheless, EMAG continues to believe that, in the end and thanks to a combination of the parliamentary ombudsman and the European Union, justice will prevail."

    Rupert Jones in The Guardian, 27th February, 2006

    Read the Ann Abraham’s letter to all MPs, dated 24th February 2006, announcing a delay in PO 2 until the autumn

  • "Equitable told not to rush sell-off

    A REPORT published today urges Equitable Life, the troubled mutual insurer, not to rush into a sell-off of its £10 billion with-profits business, Times Money has learnt.

    The study, for the Equitable Members Action Group (Emag), a 10,000-strong group of current and former policyholders, says that the society’s directors need to provide replies to many questions before members can make an informed choice…………. the report from Burgess Hodgson, the chartered accountant, fuels their fears that a sale of the business may not be in the best interests of the estimated 600,000 people who have a direct or indirect stake in the fund.

    It says that a sale to a so-called “zombie” fund that specialises in running off policies until maturity is “unlikely to be of significant benefit to policyholders”. This is because there would be no competitive pressure to put much money into potentially risky, but higher growth, stocks and shares.

    Even a transfer of policies to a “live” fund with a stronger insurer, a bigger slice of equities and better growth prospects, might not be the best option, the study says. Despite the possible advantages, a new insurer would have little incentive to restructure the business, so the shackles that currently restrict Equitable’s freedom of operation would remain. These include the problem of guaranteed interest rates (GIRs) that still apply to roughly three quarters of with-profits policies. Policyholders with GIRs are guaranteed an annual 3.5 per cent increase in the value of their policies.

    But far from being a bonus, this has become a straitjacket because the only way for Equitable to be sure of delivering on this pledge is to keep the fund in fixed-interest investments, thus forgoing the opportunity of greater growth in stocks and shares.

    Paul Braithwaite, general secretary of Emag, says: “We want Equitable to consider a restructuring of the society, including a new deal for its GIR policyholders and with-profits annuitants that reflects the current realities. Equitable has the opportunity to do this whereas a new company taking it over would have little incentive.”

    But first, EMAG members want answers to questions raised in the report, such as:

    • Could a deal be reached to phase out the GIRs?
    • Could a similar deal allow with-profits pensioners to be switched into conventional annuities?
    • Could the society switch some of its money back into equities?"
    Mark Atherton, The Times, 11 February, 2006

  • The members of the Committee of Inquiry into the Equitable Life case held their constituent meeting on Thursday and formally appointed, by acclamation, the members of the committee's bureau. The committee Chair will be Mairead McGuinness (EPP-ED, IE), with Manuel Medina Ortega (PES, ES) as first Vice-Chair and Jean-Paul Gauzès (EPP-ED, FR) as second Vice-Chair. Diana Wallis (ALDE, UK) was appointed rapporteur.

    Ms McGuinness said: "We have a serious job of work to do. All eyes are upon us. We should take some time to consider how we are going to carry out our work - and we should avoid building up unreasonable expectations. We have twelve months of work before us and we will not draw conclusions until our work is over. We will deliver to our mandate, but cannot go beyond that." She suggested the committee should also aim to draw conclusions that would be useful for MEPs in their future legislative work.

    Ms Wallis said: "Our work is of tremendous importance to European citizens. They need a system whose laws are implemented properly, where regulation applies across borders - and where, if necessary, citizens should be able to gain redress."

    The members agreed that their next meeting would be on Tuesday 21 February 2006 at 9am, at which time a decision on dates of further meetings would be taken, alongside a discussion on the working methods of the committee.

    European Parliament News 2 February, 2006

    And this from Sir Robert Atkins, deputy leader of Conservative MEPs, who said: “We want to know if there were managerial failings, if the British government did enough and if there were contraventions of EU law. I also hope we will be able to propose better safeguards that could be put in place to prevent a similar debacle.”

    The Sunday Times 5 February, 2006

  • European Parliament endorses Equitable Life probe

    The full European Parliament, sitting in Strasbourg, has approved the setting up of a committee of enquiry into the UK insurance company Equitable Life.

    MEPS decided, in a vote taken on 18 January 2006, to endorse the proposed committee. It will be composed of 22 MEPs, including Irish MEP Mairead McGuiness, who said last year, "The [Equitable Life] debacle raises huge questions over shopping across borders for pensions and other financial services."

    Millions of policy holders across Europe lost savings as a result of a failure by Equitable Life to honour policies and the company's subsequent near-bankruptcy (see EurActiv 13 Jan 2006).

    The committee has been set up further to a petition presented to the Parliament in September 2005 by the Equitable Members Action Group (EMAG), a group of policy holders who had lost savings as a result of Equitable's actions.

    Paul Braithwaite of EMAG said that he was "delighted" with the EP decision which, he said, "is a good example of the European Parliament standing up for the rights of EU citizens." Braithwaite told EurActiv that he hoped the committee, which would be able to examine issues not covered by UK investigations, would look into the soundness of the UK Financial Services Authority as a regulator.

    Further, he hoped that the committee's findings would result in pressure being put on the Commission to refer the UK to the European Court of Justice for failure to adequately implement European laws.

    EurActiv.com 20 January, 2006

    Official EU press release (PDF).

  • Europe to tackle Brown over handling of Equitable
    GORDON BROWN looks set for his second showdown with Europe in the space of a week after confirmation that the European Parliament is to open an inquiry into whether the Treasury failed to protect a million Equitable Life policyholders.

    The parliament will convene next week and is expected to endorse moves to set up a committee of inquiry into the insurer’s near-collapse that will call on Treasury officials to testify.

    The decision is a victory for Equitable policyholders in Britain who have been dismayed by the results of other investigations into the scandal, in which they lost a total of £4 billion.

    It represents a further embarrassment in Europe for the Chancellor. On Wednesday the European Commission asked EU finance ministers to censure Britain for persistently breaching the EU’s 3 per cent of GDP ceiling on state borrowing.

    Leaders representing all parties in the parliament said that the inquiry would assess the allegations that UK regulators failed to protect policyholders. There were 15,000 policyholders outside Britain, mainly in Germany and the Republic of Ireland, and the inquiry will determine if Britain broke or failed to apply EU laws.

    For most of the period covered, Equitable Life was regulated by the Department of Trade and Industry and the Treasury. Regulation was passed to the Financial Services Authority from 1999.

    An interim report is expected four months after the inquiry is launched, with a final report eight months after that.”

    Dominic Walsh, The Times 13 January, 2006

  • ELAS New Year’s Honours.

    Suits of the Year: Vanni Treves and Charles Thomson of Equitable Life, who wasted at least £30m of policyholders’ money on the failed civil actions against former directors and auditors but do not have the decency to resign.”

    Private Eye 6 Jan, 2006

    (Ed: Typical of Private Eye to get the numbers wrong: It was nearer £50m.)


    "Their dog of a day in Court

    Washing one's colourful, but dirty, linen in public has been an increasingly regular feature of the normally sober world of business coverage this year, as a stream of high-profile courtroom battles has dominated proceedings……………..

    Vanni Treves, chairman, and Charles Thomson, chief executive of Equitable, have also endured collateral damage to their reputations by dragging the case to court.
    Thomson, particularly, has suffered, following the embarrassing revelation in court that he forged his own work reference from his former boss at Scottish Widows, Mike Ross, when applying for the Equitable job........”
    Karl West in The Herald, 29 December 2005