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 - 2007

  • The long wait for justice at Equitable Life:
    Ann Abraham, the Parliamentary Ombudsman, has just updated the battered and bruised policyholders of Equitable Life about the progress of her long-awaited report into the suspect regulation of the mutual before it hit the rocks in late 2001.

    Like all Abraham's previous progress reports on Equitable Life, it is not good news, just confirmation of yet more frustrating delays.

    As yet there is not a sniff of the £4bn of compensation that some policyholders are hoping Abraham will recommend the Government pays - for idly standing by and allowing people to continue to take out policies with the mutual in the late 1990s when it knew Equitable was teetering on the edge.

    Her update, itself more than a month overdue, tells policyholders that her report is not likely to be published until next summer at the earliest. But given that the report must be presented to Parliament - whose members spend most of the summer on holiday - I wouldn't be surprised if it doesn't see the light of day until October 2008.

    And given that Abraham's original plan, when she announced she would be conducting the inquiry in July 2004, was to publish within a year, it is not surprising that many policyholders campaigning for compensation are becoming increasingly agitated over the delay.

    Abraham cannot take all the blame for the tardiness in completing this report. She put together a draft in January this year which she duly sent - as she is required to do - to the Financial Services Authority, the Treasury and the Government Actuary's Department for comment. It is these three public bodies whose actions Abraham is investigating.

    What she could not have anticipated was a joint response 500 pages long. It is the length of this response - a deliberate exercise in tying Abraham up in knots - that has stalled her.

    Having now adapted her report in light of these comments, Abraham will soon send it out to complainants for their say. She will then start preparing her final report.

    Let's hope that when she can eventually publish her findings over regulatory failure at Equitable Life, it is worth reading.

    A lot of customers, horribly wronged, are relying on this stoic woman to see justice prevail. It would be a travesty if the report ended up no more than a fudge.

    Jeff Prestridge, Mail on Sunday, 9th December, 2007
    Financial Mail Personal Finance Editor

  • Ex-MPC man slates Brown on Rock 'shambles'

    Gordon Brown must take a major slice of the blame for the Northern Rock "shambles", one of the Prime Minister's previous appointees to the Bank of England will claim today.

    Ex-MPC man slates Brown on Rock 'shambles' Prof Buiter warns that the UK's 'light-touch regulation needs to be tightened up'

    In his appearance before the Treasury Select Committee, leading economist and former Monetary Policy Committee member Willem Buiter will blame Mr Brown's decision to hive off the key regulation role from the Bank to the Financial Services Authority for creating the foundations for Northern Rock's downfall.

    He will call for the Bank of England to be reinstated as the chief banking supervisor and regulator, and argue that the MPC should be made independent of the Bank.

    Prof Buiter, who is now at the London School of Economics, also warns that the UK's "light-touch regulation has become 'soft-touch' regulation and needs to be tightened up in a large number of areas". In a submission to the Committee, he claims that not only was the new architecture of the financial system, put into place by Mr Brown when he became Chancellor in 1997, flawed but that the Bank acted indecisively, and that the crisis undermined its credibility. Northern Rock was not "too large to fail", he says.

    However, it is the accusation of the Prime Minister over his part in the disaster that will attract most attention, since Prof Buiter was one of the first economists to be appointed to the MPC by Mr Brown in 1997.

    His submission said: "The Tripartite arrangement between the Treasury, the Financial Services Authority and the Bank of England for dealing with financial instability is flawed. Responsibility for this design flaw must be laid at the door of the man who created the arrangement – the former Chancellor and current Prime Minister, Gordon Brown."

    He said the main shortcoming was that it separated the information about individual troubled banks from the agency with the financial resources to help them.

    "It's clear this separation of information and resources does not work," he said.

    He said that, in any case, Northern Rock should have been allowed to "sink or swim", but that the Government should have guaranteed all deposits. Instead, he said, two months after it was granted liquidity support by the Bank and customers' deposits were guaranteed, "Northern Rock is still on life support, having drawn over £20bn from the liquidity support facility – just under 20pc of its assets. This is a shambles".

    He said the authorities' actions meant "the UK has socialised all risk to both sides of the banking sector balance sheet".

    He added: "It is hard to argue that the survival of Northern Rock is necessary to avoid a genuine threat to the stability of the UK financial system, or to avoid a serious disturbance to the economy. The bank is not 'too large to fail'."

    He said it would even have been preferable to have taken Northern Rock into public ownership.

    "The way the crisis unfolded damaged the prestige and international standing of the City of London – the financial capital of the world – more than the other leading financial centres," he said.

    Prof Buiter also warned that ratings agencies had been subject to "multiple potential conflicts of interest" and questioned the wisdom the Federal Reserve's interest rate cuts.

    He said that since the original credit crunch was partly caused by "ludicrously complex" debt instruments, regulators and investors would now have to demand simpler structures.

    Daily Telegraph, by Edmund Conway, Economics Editor
    13th November 2007

  • “Gordon Brown is feeding you porkies

    "Misleading people". That was the accusation levelled by Gordon Brown at the leader of Her Majesty's Opposition. This was akin to Paul Daniels complaining that his rivals use sleight-of-hand to fool the audience.

    When it comes to misleading, Brown is the boss. He is Marvo the Misleader, the Daddy of Dissemblance. Where others employ fake magic, Gordon's trickery is real: successes appear from nowhere; failures vanish.

    If misleading were ever to become an Olympic sport, Brown would win more gold medals than Mark Spitz. For him, statistics are not facts; they're the perquisites of office. Numbers don't matter; it's the message that counts.

    Even the allegation that David Cameron had misled people, which caused such a rumpus in the Commons, was misleading. Cameron is no stranger to inexactitudes, but for once his charge that the Government had been nailed – in this case, over ballot-paper chaos in Scottish elections – was spot on.

    The Gould report into the Holyrood shambles concluded that the Scotland Office and the Labour-led Scottish Government had frequently focused on "partisan political interests", resulting in nearly 150,000 wasted votes.

    In Brown's bulging sty of porkies, his latest swipe at Dave was a piglet, a runt in the litter of liaisons with falsehood. But it was symptomatic of the quality of communication between officialdom and electorate: utterly dire.

    Whether it's on crime, education, taxation, truancy, health, child poverty, public finances, economic growth rates, domestic elections, the European treaty (aka constitution) or the most obscene distortion of all, weapons of mass destruction, almost nothing we are told seems to bear scrutiny.

    When examined closely, time and again, there are omissions and distortions, fudge and mudge. Veracity exists, but only as a theoretical concept – nowhere more so than in the emotionally charged debate on immigration.

    Yesterday's Today programme provided another striking example of how forces of fantasy are twisting the facts. Figures from the Office for National Statistics suggest that the population of Slough is decreasing. For those who live in this immigration hot-spot, that's an incomprehensible mistake.

    Slough council's chief executive Ruth Bagley said official estimates were "significantly out of step" with real population growth. As a result, the town suffers a £1 million annual shortfall in Government funding. She added that many other local councils are facing similar difficulties.

    Having, in effect, destroyed Britain's border controls, Labour's position is to keep asserting that immigration benefits everyone. A bit like vitamins: the more we take, the better off we are. Except, just like vitamins, that's not true. There comes a point when too much of a good thing chokes the system.

    We were told by Labour - dishonestly - that 13,000 immigrants would arrive here from the EU's new Eastern European members. At least half a million have turned up and more are on their way.

    Instead of admitting the problem and dealing with it, the Government tries to dress it up as a brilliant manoeuvre to solve our pensions crisis and make us richer.

    A recent study claims that immigrants contributed £6 billion to the economy last year. That may be correct, but it does not mean that we're all better off. It's not the size of the national pie, but the slice that each of us gets that matters. Immigrants don't just help pay for the pie, they also eat it.

    Setting aside cultural tensions, such as the unwillingness of some immigrant groups to assimilate, a vast discrepancy in employment rates (Nigerians are 76 per cent in work, Somalis 19 per cent) and the pressure that a population boom puts on domestic infrastructure, including schools, housing and transport, there has been a deliberate attempt by Government to over-state the economic benefits of allowing a crowded island to fill up even more.

    Bob Rowthorn, professor of economics at Cambridge University, strips bare this deception in an analysis for the Telegraph's website: "We need an honest immigration debate." I commend it to you.

    He summarises: "The additional amount [of GDP] produced by immigrants has been smaller than the number of people they have added to the population. The conclusion is inevitable: the result of immigration since 1998 has been to lower per capita GDP, or output per individual worker, not to increase it."

    Rowthorn describes Government assertions to the contrary as "profoundly misleading". Sadly, much else of what we are fed by ministers and their mouthpieces falls into the same box. They seem happy to perform intellectual gymnastics in order to vault over the hurdles of honesty and clarity.

    Not content with injuring truth, Brown insults our intelligence by promising "British jobs for British workers". If an employer produced a similar slogan, it would almost certainly be prosecuted for discrimination.

    Even the Prime Minister's supporters know that he cannot deliver this. If he could, more than five million British adults would not be living on welfare payments. It explains why Brown only ever shouts about Britain having more people in employment than ever before, never highlighting how many of these are not British.

    Tony Whatisname's truth-bender-in-chief, Alastair Campbell, says a cynical press is poisoning democracy. In fact, we have not been cynical enough (I too believed the scare stories about WMD). As a result, Labour has got away with murder.

    Brown has a reputation for being formidably clever. Perhaps this is why he treats the rest of us as if we were graphically stupid. How else can we explain his expectation that the public will keep swallowing fiction as fact?

    His final act as chancellor was to boast of a tax-cutting budget. Except it wasn't. City economists quickly worked out that the tax bill had risen.

    Crime, we are told by the Home Office, is going down. Maybe. But violent crime, according to the Centre for Crime and Justice, has been going up.

    Results from state education are soaring, says Downing Street. Strange, then, that there is a stampede into private schools and our best universities are being bullied into admitting comprehensive pupils with inferior grades.

    The "red lines" that Brown claims to have secured in the EU "treaty" are illusory. The document is 96 per cent the same as the constitution that was roundly rejected by the French and Dutch in 2005.

    He refuses a referendum because he doesn't trust the people. He believes (or does he?) that he knows best. He's a "listening" leader who refuses to hear what he doesn't like.

    There is to be no election this year. Why? Brown says because he wants to show the people what he can do. More codswallop. He was terrified of losing.

    Finally, there's the claim that, having had his hands on just about every lever of power for 10 years, the Prime Minister wants to sanitise grubby politics. Gordon Brown, an agent of change? The biggest lie of all.

    Daily Telegraph, Jeff Randall 26th October, 2007

  • The emperor's new clothes. EVERY politician knows the cautionary fable: the vain emperor who kept on buying new clothes, who was eventually sold an imaginary new suit—and who was suddenly and publicly revealed to be worryingly short of substance. So how on earth did Gordon Brown, one of the canniest operators in British politics, end up seeming so naked?

    The brief history of his premiership now looks rather like Hans Christian Andersen's exercise in groupthink. Since he took over from Tony Blair in June, Mr Brown has dressed himself in a whole wardrobe of different political costumes. Borrowing the traditional garb of the opposition Conservatives, he has appeared as a stout patriot and hammer of criminals and foreigners. In his preacher's cassock, he has frowned on drugs, drink and gambling. Above all, he has striven—until this week, successfully—to portray himself as principled, strong and serious, in supposed contrast to Mr Blair. The reasonably competent management of several minor crises reinforced his gravitas. He seemed to have pulled off an impressive confidence trick, persuading voters that his was a new administration, rather than the continuation of Mr Blair's, throughout whose ten years Mr Brown was second-in-command….

    The imperial pomp was shattered by a decent speech by David Cameron, the Conservative leader, and by a salvo from George Osborne, the impish shadow chancellor. Mr Osborne pledged that a future Tory government would dramatically raise the threshold above which inheritance tax is levied. Suddenly the polls, especially in marginal constituencies, looked less rosy for Mr Brown. The prime minister announced that there would be no early vote after all. But he admitted he had thought about one, contradicting his previous insistences that he was focused wholly on governing. Worst of all, he insulted voters' intelligence by denying the blindingly obvious—that the adverse polls had swayed his decision.

    Now Mr Brown seems less strong and serious than weak and spinning. A visit he made to Iraq in advance of the phantom election campaign seemed to exploit Britain 's armed forces for party advantage: the emperor of Downing Street , like the one in the fable, now stands accused of caring more for his image than for his soldiers. Meanwhile, his political underwear—his broadly successful stewardship of the economy has begun to look skimpy…….

    Mr Cameron is still underdressed; but he now has a couple of years to change that impression. Mr Brown does not. Ironically, one of the many excuses he gave for his election retreat—he wants more time to set out his “vision” for Britain —has a core of truth. So far, it is not at all clear how that vision is distinctive, beyond the laudable but universal aims of alleviating poverty, improving schools and hospitals and reinforcing meritocracy. Indeed, immediately after the climbdown, Mr Brown reverted to his costume-changing ways, hastily adopting a version of the Tories' inheritance-tax proposal and pilfering ideas on taxing aviation and offshore wealth.

    To more guffaws from the crowd, the government claims this had always been in their thoughts……………….

    Silly as he now looks, it is too early to write Mr Brown off. There is a way out of this mess, which is to govern well. With the election shelved, he must concentrate on actually doing the job he coveted for so long—and which he may end up holding for much less time than once seemed likely. He must stop trying to bedazzle, and stand before the public in his true political clothes. Assuming, of course, that he has some.”

    The Economist’s editorial, 11th October, 2007

  • “FSA Should Have Focused On Northern Rock Tests
    The U.K. Financial Services Authority should have focused more closely on U.K. lender Northern Rock's stress-testing of its risk exposure, according to Hector Sants, Financial Services Authority chief executive……………….

    "I do think we should have been concerned around the stress-testing issues… ..I am more than happy to indicate that I think there are some significant lessons to be learnt," said Sants in a testimony before the U.K. parliament's Treasury Committee.

    Sants said the FSA should have had more intensive dialogue with Northern Rock about issues such as stress testing at an earlier stage than it did…………………

    Callum McCarthy (FSA chairman) admitted the problems at Northern Rock had been damaging for the U.K. He said he had previously described the "events at Northern Rock as being damaging."

    He also said he placed slightly less stress than BOE Governor Mervyn King on the issue of moral hazard, which raises concerns about bailing out the financial sector………………

    McCarthy said the FSA didn't assess the risk of the money markets closing up the way they did during the recent liquidity crisis, which he described as an " exceptional and, indeed, an unprecedented set of events. I absolutely accept, as Hector has said, that we didn't identify the probability of that happening." ………………….

    Sants said there was a need during the Northern Rock crisis for depositors to have some security about their savings.

    "We might not have had queues if consumers had been confident that their deposits were safe," said Sants.

    Adam Bradbery, Dow Jones, on TreasCom evidence session, October 09, 2007

    TreasCom 09 October 2007

  • “Brown bottles out

    For a man who recently gave us a book called “Courage: Eight Portraits”, Gordon Brown no longer looks altogether the part. After taunting his opponents with a controlled and choreographed lead-up to electoral battle the prime minister has opted to leave the field – to understandable jeering and jubilation from a Conservative opposition that cannot believe its luck. The talk is no longer of the Brown bounce but how he has been bounced.

    The Mr Brown who addressed what was a Labour pre-election rally at Bournemouth sounds in retrospect like a posturing hardman and a sloganeering populist. Buoyed by his successful management of a summer of crises – however much helped by happenstance – the prime minister studded his speech with 23 references to strength or strong. That does now rather invite his opponents’ gleeful hoots, such as his Scottish nationalist nemesis Alex Salmond’s branding him a “big feartie from Fife ”. The prime minister looks not just weak but shifty.

    Not the least of this fiasco is that it was entirely self-inflicted. As one of the pillars of the government re-elected in 2005, there was no reason for Mr Brown to seek a new mandate. Yet in preparing so obviously to do so he has already soiled his vaunted New Politics with the spin he pledged to eschew.

    He has given an exhibition, moreover, of playing low politics with matters of state. It is one thing to hold a second opening of a hospital, quite another to use double-counting on troop withdrawals from Iraq. The whole episode marks a further advance in the creeping presidentialisation of British politics: a prime minister’s discretionary power to call an election has never looked less justifiable.

    Still, it is hard to know what will linger from this fiasco. The image of Mr Brown “bottling out” will probably endure longer in the Westminster village than the nation. Tax cuts, however, are back on the agenda after Middle (and marginal constituency) England ’s enthusiastic response to the plan by George Osborne, the shadow chancellor, to cut inheritance taxes and stamp duties for most first-time house-buyers. Mr Brown may well want to pinch those ideas, yet he is about to enter a period of fiscal constraint.

    More generally, this phoney war has left Mr Brown striking a tone of pessimism and contrived moral panic in contrast to his revitalised opponent David Cameron’s note of optimism, however glib and facile. The prime minister will need very urgently to change that. But above all, he will need to show that he really wants to change Britain , not just manage it.”

    Financial Times editorial, October 7th 2007

  • It is time for members to have their say

    Nearly 400,000 Equitable Life policyholders are to get their chance to vote on the proposed transfer of £1.8 billion of with-profits annuity policies to Prudential. If the deal goes ahead, it will free Equitable to "go out to the market" in a bid to find a buyer to bail out the remaining policyholders stuck in its with-profits fund. Equitable Life wants to transfer to Prudential all of its with-profits annuity policies, representing about 20 per cent of the with-profits fund with an estimated value of about £1.8bn. If approved, around 62,000 with-profits annuities will be transferred into an actively managed fund that has greater bonus-earning potential than the current Equitable Life fund.

    Over the next few days, all Equitable policyholders will receive information on the deal ahead of an extraordinary general meeting due to be held on October 26. All voting members of the society will have the opportunity to vote on the proposed transfer either at the EGM or by post. The deadline for postal voting is Wednesday October 24………………..

    There is no doubt that the Prudential with-profits fund is one of the very strongest in Britain, and typically holds around 70 per cent in equities and property. By contrast, the Equitable fund is at the weaker end of the scale and holds around 20 per cent in equities and property, with the rest predominantly in fixed-interest securities. This is why Vanni Treves, Equitable’s chairman, and Charles Thomson, its chief executive, believe that the holders of with-profits annuities stand a chance of getting better returns from Prudential’s ownership.

    Treves says: "It is time for the Society’s members to have their say on the transfer of with-profits annuity policies to Prudential. This transaction represents a critical milestone in the recent development of the Society and I very much hope that policyholders will decide to support it."

    The Pru’s £75bn with-profits fund is one of the few to have delivered decent growth; it has returned 10.5 per cent a year, compared with the Equitable’s return of 6.5 per cent over the past five years.

    Over the past decade the Pru fund has returned 10 per cent a year versus the Equitable’s return of 7.5 per cent a year.

    But the Equitable Members Action Group (Emag) doubts that the deal is in the interest of all policyholders and reckons that the remaining 80 per cent of investors will bear the brunt of the extra costs.

    It also highlights comments made by Nick Prettejohn, the Pru’s chief executive, that its with-profits fund "may be more volatile" than a fund more heavily invested in fixed-interest assets.

    "The Pru articulates the downside risk, which is very real, the chief executive uses the word volatility but Equitable glosses this over and talks only of potential better returns," says John Newman, the chairman of Emag.

    "Why? The new Prudential fund has no smoothing kitty from elsewhere or in it already. So there is every prospect of most annuities for with-profits annuitants continuing to go down.

    "The remaining policyholders are to bear all remaining risks and overheads on fewer shoulders. Isn’t it asking the with-profits policyholders to be altruistic and self-sacrificing to allow the with-profits annuitants to move?

    Newman says that "any clever deal was beyond Treves", who he claims has failed to deliver what annuitants want – the ability to covert their with-profits annuity into a fixed annuity.

    "The one aspect we have heard from with-profits annuitant policyholders is convertability: some want to be back in equities and have the product they bought into some years ago. Others would like to opt out for security, so would the Pru allow with-profits annuitants to convert into fixed annuities?

    Equitable rejects Emag’s suggestion and says it is not glossing over the facts.

    "The downside risks are clearly mentioned in the Q&A. There will be a increase in administration costs because we will be a smaller society, but it has been taken into account. We plan to hold back some of the funds that will go to the Pru to compensate for the loss of the with-profit annuitants," says a spokesman.

    "With-profits annuities are complex but once they are out of the way our with-profits fund will be similar to the rest of the industry – this will enable us to seek a better deal for our members."……..

    Paul Farrow, Sunday Telegraph 30th September 2007

  • The Northern Rock crisis of confidence is rooted in the Equitable Life scandal Although the true financial position of Northern Rock remains unclear, the view taken by investors is very obvious; Investors don’t trust the pronouncements of the authorities and they’ve learnt the bitter lesson of Equitable Life.

    Whilst the FSA has assured that 'Northern Rock is solvent', Chairman Callum McCarthy is simply not believed. The FSA's performance on Equitable Life has much to do with this. It’s what the FSA said repeatedly about Equitable Life and investors now know that to have been grossly misleading, as they have suffered a death by a thousand cuts whilst the Government stood passively by and left investors swinging in the wind. The policyholders who paid exit penalties and left the Society, with hindsight, suffered least financial harm. Those that stayed in with the FSA’s encouragement suffered most. Investors in Northern Rock should know that the FSA has not a single penny to back up its pronouncements. In addition it cannot, by statute, be held responsible or prosecuted.

    The one authority with credibility, the Bank of England, was stripped of its Role in 1997 when the "Uber Regulator" in the shape of the FSA took over regulation. Treasury assurances have no credibility: Investors know from experience with both Equitable Life and those in failed Occupational Pension schemes that when Government regulators are shown to have been culpable by the truly independent Parliamentary Ombudsman (the PO), the Treasury will simply deny and not honour the independent recommendations at all.

    In the case of Equitable Life the Government clearly put the interests of the Treasury first in covering up the faults of their regulatory predecessors and discouraging departures. Their second priority was to protect the industry from 'run's upon other funds with guaranteed annuity problems (GARs). The interests of policyholders didn’t enter into it. Equitable Life wasn’t strong enough to survive the GAR problem. When Equitable Life lost in the House of Lords in 2000, its liabilities far exceeded the value of its assets and its business, but the FSA still let it carry on trading and accepting new business for another five months. Once it closed, its future was sealed, but the FSA allowed it to carry on for another six months without any financial intervention. The FSA vetted the new directors and then allowed the mutual to impose a deep cut to all policy values and a profoundly unfair compromise scheme, whilst concealing from members the true extent of Equitable Life’s problems.

    There is no mystery about why the Treasury enjoys the FSA's first priority. Its directors are appointed by the Treasury to do its bidding whilst maintaining a veneer of autonomy. Nor why the financial services industry enjoys its second priority. The industry finances the full cost of the FSA operations. Although the FSA functions as a virtual branch of the Treasury, it has been self-governing and free of scrutiny by the PO since December 2001 (or by the National Audit Office). The man in the street has no influence on the FSA's activities. If one asks awkward questions the FSA hides behind 'confidentiality', resists FOI requests and even when compliant, documents are so redacted as to be gobbledygook.

    Given this structure and history, it is little wonder that investors view FSA pronouncements with profound suspicion. The ultimate check on the FSA is the Treasury Select Committee of Parliament. Under the chairmanship of John McFall, for six years it has been a toothless apologist for the Treasury. This Committee woefully lacks the credibility that other Parliamentary committees have justly earned.

    Investor confidence is crucial to the running of our financial system, upon which so many British jobs and wealth depends. However it is a fragile animal. A Treasury that takes £5bn per year from pensions funds’ back pockets, but doesn’t honour its commitments, combined with a Financial Services Authority that has nominal concern for investors, demonstrates how illusory is this Government’s regulatory regime.

    It is time for a change: The Government must pay up where the PO finds maladministration by departments of state and/or its regulators. The FSA must be made accountable to lay investors and to Parliament. Only such a changed approach, replacing the pattern of denial and prevarication, can start to rebuild investor trust in the authorities. Failure to take this action is now proving to be much more expensive to the industry and the taxpayer in the long run.”

    Letter to the Times 17th September, 2007 by Paul Braithwaite, General Secretary, EMAG

  • Labour again fails victims of Equitable Life scandal

    The Tory party lead in the European Parliament, Sir Robeert Atkin MEP, wrote to Gordon Brown about EQUI on 27th August:

    "I understand that the Parliamentary Ombudsman is, yet again, having to postpone the publication of the proposed report on the Equitable Life debacle and the implications are that it is due largely to the tardiness of your Government's response to the legitimate investigations that she is making on behalf of thousands of aggrieved citizens of the UK and other Member States.

    In the circumstances, it would seem appropriate to remind you of the recommendations of the Committee of Inquiry into the Crisis of the Equitable Life Assurance Society, which was instigated by the European Parliament……………

    After hearing evidence from, and questioning a wide range of experts, policy holders, regulatory officials and Government representatives over the course of the 17 month investigation, the Committee concluded that the crisis was caused and propagated by a diverse, yet not unmanageable, set of circumstances.

    Whilst the actions of the staff and senior management of the Equitable Life Assurance Society combined with the dereliction of duty and the failure to respect policy holders' reasonable expectations by the UK Regulators were significant contributory factors to the crisis, the British Government's failure to adequately protect policyholders in accordance with EU legislation is the most damning indictment drawn by the Committee.

    Consequently, I would like to reiterate the Committee's view that the British Government should devise an appropriate scheme to ensure full compensation for victims of the debacle, both within the UK and abroad. A recommendation that I would urge you to seriously consider acting upon and which is given extra credence upon consideration of your party's stated objective that "all older people should have dignity and security in retirement and share fairly in the nation's rising prosperity."

    Will you and your Chancellor undertake to respond fully to the concerns expressed in the Report and commit to financial recompense for the thousands of Policyholders who have suffered monetary and emotional trauma as a result of the failure by the Government to oversee or control the regulators?”

    Conservatives in the European Parliament
    27th August, 2007

  • Equitable Life victims visit Treasury.
    Victims of Equitable Life's near-collapse called on the Treasury yesterday to stop ignoring claims for compensation which were upheld by the European Parliament more than two months ago.

    The Equitable Members' Action Group (EMAG) delivered a letter to Chancellor Alistair Darling demanding a response to a highly critical report, approved by the European Parliament in June.

    This found that the British Government failed to ensure that Equitable Life maintained adequate capital reserves. The insurer was plunged into difficulties after losing a legal battle in the House of Lords, leaving it with a £1.5bn liability.

    A Treasury spokesman said yesterday: "It would not be appropriate for the Government to comment on the substantive findings made in the report, pending the outcome of the UK Parliamentary Ombudsman's investigation into the regulation of Equitable Life."

    Paul Braithwaite of EMAG accused the Treasury of "breathtaking contempt" for the European Parliament and said: "The Treasury has cynically stalled the Parliamentary Ombudsman's report three times now and is using the delay and obfuscation it causes to avoid responding to the European Parliament's calls for compensation of Equitable victims."

    Yesterday, the Ombudsman, Ann Abrahams, confirmed that no conclusions from her investigation - which began in 2004 - are expected before the end of the year.

    Faith Archer in the Daily Telegraph, 22nd August ,2007

    'Bearing the consequences' is not the UK way

    I refer to the damages against the European Commission, ordered by the Court of First Instance in the Legrand case (report, July 12).

    This appears to be an instance of a regulator getting things wrong and having to bear the consequences, and that is what people expect. Is everyone aware that bearing the consequences is not the way things would happen in the UK?

    As part of the European parliament's recent investigation into the demise of Equitable Life, we commissioned a report on liability of supervisors. Most supervisors in the European Union have legal liability in the event of negligence, but not so the UK's Financial Services Authority.

    Sure, a negligent member of staff might get their come-uppance in the form of discipline or dismissal, but there is no legal liability for the Financial Service Authority to right the harm done, be it to consumers or, as could be the case, to companies.

    Insurance supervision in the European Union is poised to move forward with the Solvency ll directive (launched by the Commission on July 10), with benefits for consumers deriving from increased competitiveness.

    There will be calls in the European parliament to seek to implement within Solvency ll, the recommendation in the European parliament report on Equitable Life that there should be liability for supervisors.

    Sharon Bowles MEP” Letter published in The Financial Times 17th July, 2007

  • "Let's make sure that it is an equitable life:
    This weekend, the Equitable Members' Action Group (EMAG) will be sending out letters to more than 200,000 former and current policyholders of the mutual urging them to back EMAG's call for Government compensation.

    The letters come in the wake of a damning report by Parliamentary Ombudsman Ann Abraham that concluded that regulators and Government departments were asleep at the wheel in the late Eighties and Nineties when Equitable Life was selling pensions and insurance policies like crazy.

    Unbeknown to customers taken in by the insurer's slick marketing - Equitable boasted that it did not pay commission to financial advisers - the insurer was teetering on the brink of ruin. It finally closed to new business in December 2000. Only drastic action on the part of the directors brought in to sort out the rubble - chairman Vanni Treves and chief executive Charles Thomson - saved the insurer from administration.

    In her report, Abraham said the Government should apologise for the failure of regulators - the Financial Services Authority, the Government Actuary's Department and the Department of Trade and Industry - to do their jobs properly.

    More importantly, she urged compensation for policyholders who have suffered at the hands of Equitable Life - compensation some experts put at £4.5bn. All the Government has said is that it will respond in the autumn when Parliament returns.

    The action group suspects that this is in the hope that the Equitable 'issue' will be largely forgotten by then and that the clamour for compensation - at fever pitch a month ago - will have dissipated. But Emag is determined that the Government should not be let off the hook, hence its mailshot.

    The four-page letter encourages recipients to urge their MP to support their call for compensation. In it, Paul Braithwaite, EMAG's general secretary, says: 'We believe the case for compensation is overwhelming.

    'The regulators were complicit in covering up the dire state of Equitable's finances for more than a decade. Now is the time to demand that the Government finally pays up and puts an end to the Government's evasion, delays and denial.'

    Financial Mail believes passionately that Equitable's policyholders should receive compensation. Their case is as deserving as those who lost their works pensions when their employers failed - pensions they had been told all along were rock solid. Thankfully, the Government - after a long battle - has compensated these victims.

    Anyone in receipt of EMAG's letter should not ignore it. They should do what the pressure group urges them to do - and write to their MP. The Government cannot be allowed to walk away from Equitable."

    Mail on Sunday, Jeff Prestridge, 10th August, 2008

    For example letters from EMAG members to their MPs click here.

    See also, Paul Braithwaite’s article in The Daily Telegraph

  • “Equitable 'fiasco' under attack
    Government must share blame for scandal, say MEPs.

    The European Parliament intervened to attempt to restore confidence in pensions this week when it voted on the Equitable Life scandal, in which more than 1m savers suffered losses.

    A highly critical EU report claimed the British Government failed to ensure that Equitable maintained adequate capital reserves and recommended that compensation should be paid. The motion was supported by 602 Members of the European Parliament, while 13 MEPs voted against and 64 abstained.

    Equitable had £34bn funds under management when it closed to new business in December 2000 after extended litigation against its own policyholders. The House of Lords ruled that the life company was wrong to refuse to honour guaranteed annuity rate policies it sold to pension savers between 1957 and 1988.

    These promised to pay higher retirement incomes than Equitable was able to deliver in the lower inflation environment of the 1990s. But the company, which used to boast about the high bonuses it paid, had failed to insure against the risk that interest rates would fall.

    Liberal Democrat MEP Diana Wallis headed the EU committee of inquiry which reported this week. It found the failure was primarily due to mismanagement by Equitable, but the company had been authorised by the Department of Trade and Industry. Ms Wallis said: "Past governments, Labour and Conservative, must carry a portion of the blame for this fiasco.

    "For the victims of the Equitable Life failure, this report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK Parliamentary Ombudsman, should act as a pincer movement and deliver compensation to victims."

    But the Government has yet to act on earlier criticism by the European Court of Justice concerning its role in the failure of many company pensions, which stripped 125,000 people of their savings. No action on Equitable is likely before the Ombudsman presents her report - postponed three times since it was due in December 2005. It is now expected in October.

    A Treasury spokesman said this week: "It would not be appropriate for the Government to comment on the substantive findings made in the EU report, pending the outcome of the Parliamentary Ombudsman's investigation."

    Sir Robert Atkins MEP, deputy leader of the Conservatives in the European Parliament, claimed that the British Financial Ombudsman Service failed in its duty to give unbiased support to Equitable's victims.

    He added: "Due to its failure to adequately protect policyholders in accordance with EU legislation, the UK Government is obliged to devise an appropriate scheme to ensure full compensation for victims of the debacle. This is imperative if people are to be expected to save judiciously for their retirements."

    Paul Braithwaite of the Equitable Members' Action Group said: "The Ombudsman's report has been repeatedly delayed to save the Government from embarrassment, but there can be little more embarrassing than the trouncing it has received from the European Parliament. I hope this report shames them into action."

    Ian Cowie, personal finance editor of the Saturday Telegraph 23rd June, 2007

  • Boost for Equitable compensation

    Euro MPs have called on the Government to offer compensation to Equitable Life policyholders, some of whom lost their life savings when the company collapsed. The MEPs overwhelmingly backed a damning report into the failure of the UK Government to protect Equitable Life policyholders from the company's financial problems.

    A vote in Strasbourg saw MEPs support calls for the compensation of tens of thousands of people who lost their savings as a result of the near-collapse of the life insurer in 2000. The vote was won by a margin of 602 to just 13.

    It follows an 18-month long probe in to the crisis by a specially convened European committee of inquiry.

    The report pins the blame on the Government's 'light touch' approach to regulating the life insurance business - particularly Equitable Life - which, it said, was seen by the authorities as too sound a company to run into trouble.

    Evidence to the inquiry suggested the UK's 'weak regulatory environment' allowed the difficulties at Equitable Life to grow unchecked. Stricter rules, as required by EU law, might have averted Equitable's 'final crisis', MEPs noted.

    The report goes on: 'There have been a significant number of statements to the effect that the UK regulators failed to prevent Equitable Life from steering into its crisis and therefore failed to protect policyholders in the UK and other member states from suffering financial losses as a direct consequence.

    'It is also apparent that the UK regulators behaved with undue awe or deference towards Equitable Life, particularly given its long history and hitherto highly reputable status, leading them to consider it as the top pick of the life insurance industry and apparently believed to be too good and too reputable to make mistakes.'

    The committee concluded that the UK Government was 'under an obligation to assume responsibility' in relation to the case.

    As such, it recommended ministers 'devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders within the UK, Ireland, Germany and elsewhere'…….

    Although the committee has no power to order compensation, the report's author, Liberal Democrat MEP Diana Wallis, said she hoped the report would trigger improved law-making to safeguard consumers….

    Ms Wallis said: 'I believe this report will assist the victims in a pincer movement with the UK Parliamentary Ombudsman, perhaps finally to deliver compensation. 'More importantly, I hope it will deliver a huge jolt to our institution about our lawmaking processes and the European system of justice.'

    Paul Weir, chairman of the Equitable Late Contributors' Action Group, said: 'It is now time for the British Government to face up to the inevitable and pay the compensation we have been waiting for for so long.'

    Daily Mail 20th June 2007

  • Victims of Equitable Life scandal await result of Strasbourg debate

    THE British government will be called upon to pay full compensation to victims of the Equitable Life collapse when the scandal is debated before a full gathering in Strasbourg of the European parliament on Tuesday, writes Teresa Hunter.

    This follows a year-long investigation by members of the parliament spearheaded by Yorkshire & Humber MEP Diana Wallis, which concluded that the UK government had failed to comply with EU legislation requiring it to safeguard investments. This follows pressure from the Equitable Members Action Group, which first petitioned the European parliament for an investigation more than a year ago.

    The existence of some 20,000 non-UK EU investors who had lost money when Equitable collapsed persuaded the European parliamentarians that they should examine the events leading up to the debacle which destroyed what was once Britain's finest insurance company.

    EMAG spokesman Paul Braithwaite said: "The Equitable debacle has rumbled on unresolved for more than six years, it was clear we were going to get the runaround from the British government and establishment which wanted to bury the whole matter.

    "With the Treasury finding more and more ways to keep it in deep field we had no choice if we wanted justice. We believed we had to take our case to Europe."

    The report of the investigating committee will now be placed for endorsement before all members of the parliament.

    It found that there had been a regulatory failure and that in the absence of any other real possibility of redress for the victims, "the UK government is under an obligation to assume responsibility". It therefore recommends that the UK government devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders within the UK, Ireland, Germany and elsewhere.

    The EU has no power to force the UK government to pay compensation. However, overwhelming support for the victims in Tuesday's debate would prove hugely embarrassing.

    The investigating committee urges the UK government to implement recommendations by the UK Parliamentary Ombudsman. However, the report due this month has been delayed due to the weight of defence material which the government has handed to the Ombudsman's office.

    Equitable Life collapsed after selling generous guaranteed pensions in the 1980s and 1990s which it could not afford to meet. More than a million investors saw their pensions cut as a result.

    Teresa Hunter in Scotland on Sunday 17th June, 2007

  • Brown under fire for delay on Equitable.

    The Conservatives last night accused Gordon Brown of deliberately seeking to delay publication of an independent report into the Equitable Life crisis until after he has left the Treasury.

    George Osborne, the shadow chancellor, suggested the Treasury had "deliberately swamped" the parliamentary ombudsman with hundreds of pages of new documents to force a delay in publication of a potentially embarrassing report for the government.

    Mr Osborne was commenting after the long-awaited report by the parliamentary ombudsman into possible regulatory error over Equitable Life was delayed for what is believed to be the fourth time because of a "substantial" response from bodies including the Treasury and the Financial Services Authority.

    Mr Osborne said: "Hundreds of thousands of people had their life savings cut by the crisis at Equitable Life and it is vital that the parliamentary ombudsman has the time she needs to complete a thorough investigation.

    "However, a cynic might think that Gordon Brown has deliberately swamped the ombudsman with paperwork in order to delay the report until after he's left the Treasury and can try to escape the blame."

    Ann Abraham, the parliamentary ombudsman, told MPs yesterday, that at this stage, she can "give no commitment as to the timetable for publication".

    The latest delay is a further blow to Equitable members, many of whom hope Ms Abraham will force the government to pay compensation to members. Equitable's annual meeting is today.

    Ms Abraham said she had sent a draft report to the Treasury, the Government Actuary's Department and the FSA in January.

    "I have received a substantial joint response from these bodies [which runs to more than 500 pages]", her letter to MPs said.

    "Given the nature and extent of these representations, I will need some time to consider, together with my professional advisers, all of the points which have been made by the bodies under investigation."

    The ombudsman's office declined to give further details of the response.

    Ms Abraham said last October that the earliest she would be able to present the final report was May 2007. This followed comments in February 2006, when the report was again delayed, that it may not appear before the end of 2006.

    When Ms Abraham, in November 2004, gave details of her wider inquiry into possible regulatory error over Equitable, she said she hoped to complete it some time during 2005. The ombudsman said she would write to MPs again in October.”

    James Blitz and Andrea Felsted in the Financial Times, 24th May 2007

  • When an Equitable Life becomes an inequitable life
    The provisional findings of a Parliamentary inquiry into the crisis over the Equitable Life insurance company which left over a million savers out of pocket argue that the UK Government is "under an obligation to assume responsibility" and should therefore set up a compensation scheme. The inquiry has spent the last year speaking to witnesses and investigating the background to the case.………

    UK Government should set up compensation scheme
    The provisional findings of the draft report authored by British Liberal MEP Diana Wallis are:

    • The UK government is "under an obligation to assume responsibility" and should therefore set up a compensation scheme for policyholders.
    • EU law and policymaking must be overhauled to prevent future cases.
    • EU legislation should give consumers "clearly defined rights which can be relied on before national courts" and there should be better alternative dispute resolution schemes throughout the Union.
    Speaking last week Diana Wallis said that "this is the first time the European Parliament has had an opportunity to look very carefully at how a piece of legislation is implemented and how it works in practice across the EU". She warned that because of improper implementation of the Third Life Directive "things like that might happen elsewhere as well".

    38 witnesses - 11 public hearings
    The inquiry left no stones unturned in its quest for the truth about the collapse of Equitable Life. In the course of its work it heard from 38 witnesses, held 11 public hearings, met 19 times and sent 2 fact finding missions to London and Dublin.

    The full Committee of inquiry will hold a vote on the report on 8 May with a full vote in the Plenary session expected in June. Unfortunately for savers, the Committee cannot force the payment of compensation.”

    Official EU press release 18th April 07

    See earlier press release from EQUI.

  • The UK government is “under an obligation to assume responsibility” for victims of the Equitable Life debacle and should therefore set up a compensation scheme for policyholders, says a draft report unveiled at the European Parliament committee of inquiry on Wednesday………

    Today's draft report, authored by Diana Wallis (ALDE, UK), still has to be put to the vote by the committee on 8 May and subsequently approved by the full Parliament. Some Members today announced their intention of tabling amendments to the report before the committee vote.

    EU directives inadequately implemented

    In her draft report Diana Wallis argues that the UK’s technique of implementing EU insurance legislation in a piecemeal fashion (through a number of different legal acts) “lacks clarity” and that "the implementation process as a whole was flawed”.

    UK regulators at fault

    The UK regulatory system (including such bodies as the Financial Services Authority, the Treasury and the Department of Trade and Industry) is severely criticised, notably for its “excessive leniency” towards Equitable’s solvency margins. This is attributed partly to Britain’s “light touch” regulatory policy, which the rapporteur says "went one step too far and contributed to the creation of a weak regulatory environment, which allowed the difficulties at ELAS to grow unchecked". Another factor was the regulators' “undue ‘awe’ or ‘deference’” towards the company, because of the latter's solid reputation. They also failed to challenge the “potential conflict of interests” in the fact that Equitable’s Appointed Actuary was simultaneously its Chief Executive. Overall, the draft report challenges the Penrose report’s view that “regulatory system failures were secondary factors”.

    Redress hard to come by

    Many victims of the crisis “had great difficulty in knowing what route to take or who to apply to in trying to make a complaint and obtain redress”, says the draft report. The result was “a pattern of confusion and much inequality of treatment”. Taking Equitable to court was an option available to “only a few affluent policyholders”, while ombudsman schemes, such as the UK's Financial Ombudsman Service, proved ineffective……….


    Compensation for Equitable victims

    The EP committee cannot force the payment of compensation. However, the draft report argues that, in view of its "failure to comply" with EU legislation and in the absence of any real possibility of redress for the victims, "the UK Government is under an obligation to assume responsibility". It therefore "strongly recommends that the UK Government devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders both within the UK and abroad". It also “urges the UK Government to accept and implement any recommendations the UK Parliamentary Ombudsman may make" in her second report on Equitable Life, which is due to be published soon.

    Policy and lawmaking

    Looking at the broader issues, the draft report points to "the need to foster consumer confidence in pension products" and hence requests that "any financial services legislation duly recognizes the priority of investor protection issues" while at the same time minimizing red tape and not stifling innovation.

    The report also calls for EU legislation to give consumers “clearly defined rights which can be relied on before national courts” and for better alternative dispute resolution schemes throughout the EU. In short, if business is to get the benefit of the single market, consumers must have clear rights too. Companies must be told, "there is ‘no mobility without liability’".

    Role of EU institutions in monitoring legislation

    The European Commission, says the draft report, did not monitor the application of the EU insurance legislation effectively, although it may have followed the prevailing practice at that time. In future it should be “more proactive” on this front, for which purpose it would need more resources. The standing committees of the European Parliament, too, should play a more active role in monitoring the implementation of legislation in their own policy areas…..

    The European Parliament’s official website, 11th April 2007.

  • UK told it has ‘moral obligation’ to pay Equitable policyholders
    The European Parliament's inquiry into Equitable Life will find the UK government guilty of failing to protect one million policyholders and declare that the government has a "moral obligation" to compensate them.

    The single-issue inquiry, the first of its kind in Brussels for 10 years, will publish a 373-page report which says policyholders were deprived of the "rigorous supervision" and "adequate protection" stipulated by the European Union's Third Life Directive, and also of a fair hearing for their complaints by Britain's Financial Ombudsman Service (FOS).

    The inquiry was expected to publish its findings formally next month. However, the entire report was released at the weekend by Diana Wallis, a LibDem MEP and member of the inquiry committee. ……………….

    In its conclusion, the report says: "It should be recalled that Equitable Life victims are not investors willing to take risks for the prospect of attractive returns. Rather, they prudently set aside money for their retirement with a highly reputable society, which led them to believe that their investment was absolutely safe. These policyholders were entitled to expect from the UK government thorough and rigorous supervision of all financial services providers ... including Equitable Life."

    It goes on: "Had the UK regulators correctly applied the provisions of the directive, they would most likely have ... avoided the crisis at Equitable Life, which caused substantial losses to policyholders."……………………

    It says the compensation should be payable to all those non-GAR (guaranteed rate) policyholders and annuitants who were affected by the 16% cut in policy values in July 2001, and should cover all losses that were not market-related, "in particular those due to the society's practice (which remained unchallenged by regulators) of paying excessive bonuses during the 1990s".

    The calculation should differentiate between policyholders according to when they joined, to reward those who had not benefited from the historic over-bonusing.

    It adds: "The high costs and risks under the UK legal system prevented the average policyholder from suing the society, and these consequently had to rely on the FOS as the only possible route to redress. The committee is of the opinion that this is clearly unfair."

    Yet the FOS, says the report, froze all complaints and then appeared not to treat them on their merits, but on what effect resolving them might have on the society. There were "serious shortcomings" in the FOS's operation. "The committee therefore demands that the UK government urgently address these shortcomings, strengthen the FOS's capacities and ensure that it is truly independent from the Financial Services Authority."

    Simon Bain in The Herald 2nd April, 2007

  • “………………..On 21st March, the Treasury finally capitulated (in part) to the Occupational Pensioners’ claims, NOT on the basis of the PO report’s recommendations (which it still rejects) but by an expansion of the Financial Assistance Scheme (FAS). We note that after two years, the FAS has still only disbursed less than €5 million. This new concession, which the government claims is for compassionate reasons, still falls far short of the PO’s recommendations made over one year ago. It has come about after intense media and political pressure and its proposed methodology seems deliberately designed to avoid setting any precedent for compensation of Equitable victims.

    EMAG fears that the UK government intends, even after EQUI and the PO report, to prevaricate and continue to deny culpability over Equitable. Sadly, we anticipate that, whatever the PO’s recommendations, the government will continue to tough it out – six years after the devastating policy value cuts hit 1.5 million pension savers, many thousands of whom were not UK citizens.

    We at EMAG have poured incalculable hours of our directors’ time and over €100,000 of our supporters’ contributions during the past three years into seeking to inform both the PO team and EQUI. The prospect of the UK government ignoring any adverse findings from either report and refusing us compensation is most dispiriting, yet we are determined to fight on to obtain justice for all of Equitable’s victims, present and past.

    Finally, we must make the point that it is deplorable that the citizens of the 27 European member states are entirely dependent on the FSA for protection on all UK investment products. The FSA has, since 1st December 2001, been accountable to nobody and is now, in effect, responsible for policing itself. We fully expect the PO’s report will reveal deplorable behaviour by the FSA - behaviour that will demonstrate how outrageous are the current flawed UK regulatory arrangements. But UK law precludes the PO looking beyond 2001.

    ONLY EQUI can comment on the FSA’s behaviour in the last five years.”

    Extract from EMAG postscript submission to the EQUI Inquiry, 23rd March 2007

  • Government 'guilty' of Equitable failures

    The Parliamentary Ombudsman will find the Government guilty of failing to properly regulate Equitable Life, according to a draft report presented privately to the Treasury.

    Ann Abraham, Government 'guilty' of Equitable failures
    Ann Abraham: critical report

    Millions of former and current policyholders may have a claim for compensation after the report is published this year. However, critics warned that Whitehall may ignore the conclusions of Ann Abraham's report, as it did with her investigation into collapsed pension schemes.

    The Government is working on a defence for the twice-delayed report into Equitable, which concludes that official regulators were guilty of "serious, serial maladministration", according to sources close to the investigation.

    The news raises the prospect that it may have to pay out compensation - of anything up to £4bn - to those who lost money when Equitable collapsed.

    However, the report may not be released until as late as June. It is expected to rebuke the Financial Services Authority for failing to properly monitor Equitable, which was plunged into difficulties after losing a legal battle in the House of Lords over the rights of some of its policyholders, leaving it with a £1.5bn liability.

    The European Parliament has also opened an investigation into whether the Government failed in its role as regulator.

    Daily Telegraph, by Edmund Conway 12 March, 07

  • “Pru deal gives Equitable customers cause to celebrate

    EQUITABLE Life's with-profit annuitants must this weekend feel like they have woken up from a nightmare, with the news that the Prudential is to take over their 62,000 contracts……….

    Over the past three years, the annuitants have seen their pensions slashed by 40%, but unlike other policyholders they were unable to flee the fund. They had no alternative but to sit and suffer repeated cuts to their income, with the very real prospect that their money might run out before they died.

    So last week's announcement that their 20% of Equitable's with-profits fund, worth about £1.8bn, is being transferred to the Pru must be a cause for celebration. Finally their lifeboat has come in. Not only should the Pru deal offer a degree of certainty and security, but it allows them to be part of a well-managed with-profits fund with a good spread of investments that might lead to a rising income again...........

    However, the transfer cannot take place without the support of the 250,000 members who will remain in the with-profits fund. Why they are still there when they could easily have escaped by now is a mystery to me, but no matter. It is possible some may object to the proposal on the grounds that they will be left to shoulder any new compensation claims for mis-selling, should the report from the Parliamentary Ombudsman, due in June, give aggrieved policyholders new grounds to sue. The Pru is not acquiring any liability for past sales.

    Call me cynical, but I can't get over how convenient all this is for the government. As we wrote a fortnight ago, if the Ombudsman finds fault, the with-profits annuitants are one of the obvious deserving groups with a strong claim for compensation. All of a sudden, just ahead of the report which looks set to make more uncomfortable reading for ministers, someone has waved a magic wand and their problems are solved.

    Teresa Hunter in Scotland on Sunday, 18th March 2007

  • Sunday Times: “THE government is expected to be found guilty within weeks of failing in its duty to regulate Equitable Life, potentially paving the way for billions of pounds in compensation for the insurer’s customers, writes David Budworth.

    An official report conducted by the Parliamentary Ombudsman Ann Abraham into Equitable has been sent to the Treasury ahead of its publication in May.

    Sources close to the investigation say that it will conclude that government regulators were guilty of “maladministration” by failing to spot Equitable’s poor financial state in the 1990s.

    It will give fresh hope to Equitable’s 1.5m policyholders who had their savings slashed when the insurer almost collapsed in 2000 in what was one of the worst financial scandals of modern times. Campaigners hope the government will pay more than £4 billion in compensation.
    But there are fears ministers will try to wriggle out. Although the ombudsman can call on the government to compensate those who have lost out, she cannot force it to follow her advice.

    Vincent Cable, the Liberal Democrat Treasury spokesman, said: “The government is desperate to avoid paying compensation. If it refuses to accept the ombudsman’s recommendations it makes a mockery of the whole system.” ………

    Although the ombudsman is expected to find that there were regulatory failings, the government’s dismissal of the ombudsman’s recent report into occupational pensions suggests it will not be keen to pay up.
    The ombudsman urged the government to pay full compensation to 125,000 workers who lost all or part of their pension benefits when their companies wound up final-salary schemes. But it brushed off the report.
    Last month, the High Court concluded that the government’s rejection was wrong. But the government still refuses to budge and is considering an appeal.

    Paul Braithwaite of the Equitable Members Action Group said:

    “The government’s response to the ombudsman’s report into failed occupational pension schemes demonstrates the depths of its arrogance. We don’t intend to be thwarted in our fight for compensation.”

    Policyholders hope that an inquiry by the European parliament will also conclude that the regulators failed, adding to the pressure for government redress. It plans to publish its findings before the parliament’s summer break.

    The Sunday Times, David Budworth on March 11, 2007

  • Is the end in sight for Equitable Lifers?
    I wonder how beleaguered Equitable Life members felt on Friday morning when the news emerged that the insurer's former chief actuary, Roy Ranson, had been kicked out of the Institute of Actuaries.

    Their misery has dragged on and on, so much so that the very mention of Equitable Life tends to bring from those not involved a sigh and a groan, followed by the question: "Isn't this saga over yet?"

    For the tens of thousands of policyholders the answer is, sadly, no……

    Policyholders have long believed that former directors Ranson, Chris Headdon and Alan Nash were the principal architects of the society's downfall. On Friday policyholders got the answer they had known deep down in their hearts for years – that the trio, Ranson in particular, are responsible for their plight. Ranson was the society's actuary between 1982 and 1997 and managing director from 1991 to 1997 – he was also awarded the CBE for services to the insurance industry in 1996. His reputation is now officially in tatters after being "struck off" and kicked out of the Institute of Actuaries for good.

    The institute found Ranson guilty of giving a misleading impression of the society's financial strength, so much so that "no evidence was provided to the panel to indicate any proper degree of financial analysis undertaken by the society".

    Crucially, and what the institute's panel found to be the most serious of the charges, is that Ranson did not distinguish between the policies issued before 1988, which paid guaranteed annuities, and those thereafter, which didn't. This provided the basis for the collapse, the panel said.

    As the society's actuary during that period, Ranson also oversaw the decision to apply differential bonus rates on policies. The institute, for one, found that Ranson did not take steps to ensure that the life fund could support such future bonuses. Less satisfying for policyholders is that Headdon and Nash were merely "admonished" by the institute (although Headdon had already been barred from working in a regulated capacity by the Financial Services Authority)……..

    Ranson is only the third institute member to be thrown out in the past 20 years. He is now in his mid-70s and so his expulsion is sadly nothing more than academic, but the evidence against Equitable – and the Government – is mounting.

    The Parliamentary Ombudsman's report is finished and was circulated to those at the heart of its investigation in January. The institute's findings will have no bearing on its conclusion. But there is increasing speculation that the Ombudsman will find the Government guilty of maladministration. If it does, the calls for compensation – estimated to be £5bn – will come thick and fast. There are plenty of policyholders who have not given up the ghost. The Ranson verdict probably gave them nothing more than a smidgen of satisfaction – after all, they wanted him found guilty in court – but a deal with Equitable put paid to that. Its policyholders, quite rightly, will not apologise to anyone fed up with the Equitable Life shenanigans, because for them the fight goes on.

    Paul Farrow, MONEY section editor, Sunday Telegraph 4th March, ‘07

  • They did the right thing - now it's your turn, Gordon

    Dear Chancellor,

    I am sure you are aware of the situation facing 125,000 employees and pensioners who have lost their pensions through no fault of their own. They have contributed for up to 40 years to pension schemes run by their employers, but unfortunately those schemes closed without having sufficient money to honour the pensions they were due to pay……….

    They are not rich people who can afford to sustain a financial loss. They are steelworkers, shoemakers, factory workers. Mr Waugh, 67, thought he would receive £7,500 a year, but when he came to retire in September 2004 he discovered that the gross amount was £2,900. He has had to carry on working to make up the difference - taking on jobs like driving heavy goods vehicles and canvassing door to door.

    These people were trying to do the right thing, the thing that this government wants us all to do - save for our own retirement. Under European law, the UK government should have put rigorous safeguards in place to make sure they money saved was safe. The European Court of Justice has determined that this did not happen.

    You might also expect that the government could be trusted to provide accurate information about the risks involved in contributing to such pension schemes. But the Parliamentary Ombudsman and now a High Court judge have both ruled that leaflets published by the government were 'sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading'.

    In a judicial review judgment published last week, the High Court said the government should reconsider its decision not to fully compensate these people. And yet still your government is delaying. Pensions Secretary John Hutton has told the House of Commons that the government has been given leave to appeal this judgment, and is considering the grounds on which it will do this….

    But back in 2000 when the government sorted out another pensions mess, this time involving Serps, everyone was compensated because sorting out who was misled (again by government misinformation) was deemed too difficult. Alistair Darling, the then Pensions Secretary, said: 'When someone loses out because they were given the wrong information by a department, they are entitled to expect the government to put it right... Political responsibility must lie with the government in office at the time. I accept responsibility for anything that happens during the term of this Labour government. However, I also accept responsibility for putting the situation right.'

    If only the current Pensions Secretary could take the same stance. But everyone I have spoken to in the course of reporting this story has said the same thing: that John Hutton has no real power to decide to compensate. That the real obstacle is you.

    The court cases that will determine whether these people - many of whom are probably Labour voters - get compensation will take months, if not years, to come to fruition. Thousands of those affected are in their sixties, and already drawing their state pensions.

    Please do what everyone who has supported and voted for a Labour government over the last 10 years would expect from you. Compensate these people now. Don't make them wait any longer.

    Yours sincerely,

    Jill Insley
    Cash Editor
    Jill Insley, The Observer February 25, 2007.

  • Labour is too morally bankrupt to pay pensioners what it owes

    “After a decade of Downing Street's lies and deception, it seems unlikely that anyone with an IQ bigger than his shoe size accepts Mr Campbell's view of life. Even the village idiot would surely have been disabused of such a notion by events in the High Court on Wednesday. It was a triumph for decency over dissemblance. One for the good guys, who had to withstand threats that they would be hounded for every penny of costs if they lost.

    Throughout this disgraceful affair, the Government has failed miserably to explain why these unfortunate souls should be hung out to dry. What it has demonstrated, however - beyond any reasonable doubt - is its readiness to bully little folk, manipulate numbers and distort facts. By comparison, back-street bookies in a banana republic seem paradigms of financial integrity.

    The Prime Minister bangs on that any solution must be "affordable". Oh, please. This from a man who has spent billions on a war that was justified by a dodgy dossier about non-existent weapons of mass destruction. Cheating, connivance and corruption have become indelible trademarks of the Blair regime. The DWP suggests that full compensation for dispossessed pensioners would cost the taxpayer about £15 billion. Frightening, eh? Yes, it is meant to be. In fact, the payout would be nothing like that. Intriguingly, the Treasury refuses to reveal its estimate of the cost of full compensation………Ros Altmann, a former adviser to the Treasury, reckons the peak cost to the taxpayer would be £150 million a year, diminishing steadily as claimants passed away………….

    As for ministers, they have voted themselves gold-plated, diamond-encrusted, fur-lined, leather-upholstered, deluxe retirement schemes, all paid for by taxpayers who have no such benefits and face the prospect of working to 67 in order to make ends meet.

    Cash for honours? Certainly, Sir. Cash for pensioners? On your bike.

    Daily Telegraph, Jeff Randall 23rd February, 2007

  • Equitable Life Inquiry European Parliament report of highlights of Lord Neill to the Brussels Committee meeting 1st February:

    “Lord Neill outlined his report which he had prepared at the request of EMAG, regarding how complainants felt they had been dealt with by the Financial Ombudsman’s Service and whether those perceptions were well founded or not.

    His conclusions are:
    1 - That the FOS fell short of the standards that complainants were entitled to expect, these being the standards which the service itself proclaimed and advertised.
    2 - That those policyholders who had what are known as ‘Penrose related claims’, had good reason to be dismayed by the Chief Ombudsman’s dismissal of their claims both as regards the process by which he reached his decision and as to its content. (The FOS had rejected all such claims without considering their merits, apparently having discussed the matter with the FSA.)
    3 - On the question of the FOS refusal to allow a complainant a proper explanation of how their individual offers of compensation had been arrived at, he said that no court would allow a litigant to be left in such a position of ignorance.
    4 - He also expressed the view that the relationship between the FSA and FOS was too close which impinged on the capacity of the FOS to be independent in its judgements.

    The committee is expected to circulate its draft report in mid-April for discussion and amendment. It will go to the full Parliament in either June or July, where it will be open for amendment and final approval.“

    Proinsias De Rossa - an Irish member of the 22 MEP EQUI Committee of Inquiry, 2nd February 2007

    See press coverage.

    Read Lord Neill’s report in full.

  • Ombudsman failed Equitable Life victims, says report

    The Financial Ombudsman Service, the official body for resolving complaints about financial firms, let down victims of the Equitable Life scandal by failing to give them a fair hearing, according to a scathing report by an eminent barrister.

    Lord Neill of Bladen QC, the former chairman of the Committee on Standards in Public Life who famously advised Tony Blair to hand back a £1m donation from Formula One promoter Bernie Ecclestone, said Equitable policyholders could reasonably conclude that the service provided by the ombudsman "fell short of the standards which they were entitled to expect"………….

    In March 2005, Walter Merricks, the chief ombudsman, angered policyholder action groups when he decided not to investigate complaints relating to the findings of the previous year's damning Penrose report into what went wrong at the insurer.

    Lord Neill said the impression gained by the complainants whose cases he had studied "is that the FOS is not a body which holds the scales of justice evenly. It is a body which in many ways and in many instances has displayed partiality towards the financial firm, in this case Equitable Life".

    He added that long delays in processing complaints "had a corrosive effect," while many of the case studies revealed attitudes on the part of ombudsman service officials which the complainants felt were "unhelpful, unnecessarily argumentative, or even aggressive. At worst, the officials were seen as advocates for Equitable Life"……….

    The Financial Ombudsman Service was scathing in its response to the report.

    "We haven't been given the opportunity of seeing Lord Neill's report. From what we hear, his findings sound unfair, unbalanced and inaccurate," said a spokeswoman. "Nor were we allowed the opportunity to give evidence - or respond to criticism - as Lord Neill refused our request to present him with facts and background information about our work on the 8,000 Equitable disputes we have handled."

    The spokeswoman added: "It seems ironic that a report that appears neither impartial - nor properly representative of the views of people who brought complaints to us about Equitable Life - should accuse the ombudsman of being unfair, simply because we cannot always tell those with complaints what they would like to hear."

    Rupert Jones, The Guardian, Wednesday January 31, 2007

    Read Lord Neill’s Executive Summary report into the FOS.

    Read the full 250 page report here.

  • Equitable inquiry asks for extra time

    The European Parliament's committee of inquiry into the collapse of Equitable Life has asked for a three-month extension. If granted by the president of the parliament, the extra time would mean the influential report from Brussels would appear after publication of the eagerly-awaited report by the Parliamentary Ombudsman Ann Abraham…..

    The committee, set up in response to a petition by the Equitable Members Action Group (EMAG) two years ago, now aims to publish its final report in time to table it to the Parliament before the summer break.

    It said yesterday: "The amount of evidence being analysed, together with the complexity of the issues, mean that more time is needed."

    The committee, one of only a handful of such inquiry vehicles set up by the EU in recent years, has already been granted one three-month extension to April.

    Abraham had been expected to report to Parliament last month, some 14 months after her first target publication date and almost two-and-a-half years since she was charged with investigating whether the government was guilty of maladministration over Equitable. But in mid-October it was revealed that the Treasury had that month submitted, out of the blue, a huge cache of new documents relating to 2001, a critical period just after the insurer's near-meltdown in 2000, on which evidence was never submitted to previous inquiries by the Financial Services Authority and Lord Penrose.

    EMAG said it believed the documents would provide significant ammunition in the inquiry. But it also suggested that the delay was politically convenient, and might prevent the European Parliament's committee from having access to the report…….."

    Simon Bain in The Herald 5th January, 2007