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 - 2008

  • "Justice delayed is justice denied for EquitableLife victims. Another year ends with hundreds of thousands of victims of the Equirtable Life scandal still waiting for justice but there may be good news at last early next month……..

    It is a decade since this newspaper first reported Equitable’s refusal to honour guaranteed annuity rates it had sold to some of its 1.5m savers and eight years next month since I wrote in these pages about why I was taking my money out………..

    When I was called to give evidence to the Public Administration Select Committee on the damage this scandal has done to confidence in savings, a senior MP indicated that they were fed up with this policy of postponement and would not allow “autumn” to be stretched beyond the end of November.

    By the time of the debate on the Queen’s Speech on December 3, even Prime Minister Gordon Brown seemed to be ashamed of the apparently endless delay. He promised to respond to the Parliamentary Ombudsman’s report “before the House rises for Christmas."

    Now even that deadline has been missed, with Ms Harman postponing an announcement until after MPs return from yet another holiday – ooops, perhaps I should say “recess” – on January 12.

    As pointed out here several times over the years, justice delayed is justice denied when you are talking about the savings of older people. About 30,000 Equitable Life policyholders have died since the House of Lords effectively closed this racket down……..

    Now the indefatigable Paul Braithwaite of Equitable Members’ Action Group claims he smells victory.

    He told me: “Remember there were 10 times as many people affected by Equitable as there were in the company pensions that failed and, since then, the Government has bailed out Northern Rock among other banks – including those in Iceland.

    “If they were going to let us down again, we think they would have slipped out an announcement just before Christmas.

    The feedback we are getting from Labour backbenchers is that Equitable could become an election issue, particularly in marginal constituencies with a majority of less than 5,000. So a favourble outcome for us would keep the Government’s options open for a spring or summer election.”

    After so many false dawns, that may sound like the triumph of hope over experience. But let’s hope he is right – even if it is all for the wrong reasons.”

    Ian Cowie, Saturday Daily Telegraph 27th December, 2008

  • "EMAG says it’s time to right the Equitable injustice. After eight long years the government has finally accepted that the Equitable scandal isn’t going to go away.

    EMAG (Equitable Members’ Action Group) has been fighting this gross injustice since 2000. An estimated 50,000 letters sent by aggrieved investors and our many constituency meetings up and down the country have finally communicated the sufferers’ justified outrage to MPs of all parties and won over their support. The anger has been fuelled by the government’s largesse in the £4billion bail out of Icesave.

    It seems as though last week was the turning point. The deferral of the government’s long-overdue statement on Equitable was good news because it almost certainly signified that the Treasury had realised that any plan to brush us aside yet again wasn’t going to work.

    In July Ann Abraham, Parliament’s own independent Ombudsman recommended compensation. The EU Parliament had earlier called for prompt payment of compensation. This week the influential all-party Public Administration Select Committee has unequivocally endorsed the Ombudsman’s report. It was the 14th report into Equitable Life. All three enquiries looked to EMAG to provide the primary evidence on policyholders’ behalf.

    The government having to address another big compensation bill at a time of financial meltdown is regrettable but does not negate our claim for regulatory failure for the decade up to 2001. That the Treasury has spent seven years obstructing justice for Equitable Life victims isn’t of our making. Indeed, had matters been dealt with properly at the time, the FSA would have been a different animal and the collapse of Northern Rock would arguably not have happened.

    Since 1990 Equitable policyholders were victims of a shocking Ponzi scheme scandal. Not only did the financial regulators know it but they did nothing. After 1999 the FSA even contrived to keep the company open when it was insolvent, deliberately misleading the investors and covering up its own failures. If we had known about the true parlous state of Equitable Life at any time after 1991, which the regulators did know full well, we would not have put our money into Equitable in the first place – so the regulators failed us 100%.

    The losses to our savings for pensions were crystallised with the swingeing cuts in July 2001 – which is when EMAG concluded that compensation from government was warranted, because the regulators had consistently failed in their statutory duties. EMAG’s well-evidenced claim for £4.6billion is only for those losses arising directly from the maladministrations identified by the Ombudsman.

    In mid-January EMAG expects the statement will set up the tribunal proposed by the Parliamentary Ombudsman to oversee distribution of large-scale compensation. The government would be well advised to turn over a new leaf in 2009 and address Equitable swiftly, generously and honestly. Any further fudging or delaying devices could make it a very embarrassing election issue.

    The individual chosen to chair the tribunal must be utterly impartial - not a government toady. It's time for the government to own up and pay up. In fact it’s far too late for the 32,000 who have died waiting for justice.

    Paul Braithwaite, General Secretary of EMAG Observer 21st December 2001

  • "Senior Labour ministers forced to apologise for dire handling of Equitable Life collapse.
    Two senior ministers were forced to apologise today after being accused of betraying hundreds of thousands of Equitable Life policyholders who lost their savings in the insurer's collapse.

    Labour's deputy leader Harriet Harman and Treasury minister Ian Pearson told MPs they were sorry that the Government had failed to respond to recommendations that it pays compensation to those who lost out.

    Prime Minister Gordon Brown told MPs earlier this month that the Government would end uncertainty for the Equitable Life losers by Christmas.

    Deputy Labour leader Harriet Harman and Treasury minister Ian Pearson have said the long-awaited report on Equitable will now be published next year.

    But almost a decade since the firm folded, the Government has shelved its response yet again until the New Year.

    A damning report in the summer from the Parliamentary Ombudsman found the Government guilty of a 'decade of regulatory failure' that contributed to the collapse and said losers should be compensated.

    Equitable Life was brought to the brink of collapse after the House of Lords ruled in 2000 that it must honour its obligations on policies with guaranteed annuities. It faced liabilities of £1.5billion.

    More than one million policyholders lost an estimated £4billion as Europe's oldest mutual came close to bankruptcy.

    In her report, Parliamentary Ombudsman Ann Abraham condemned the Department of Trade and Industry, the Government Actuary's Department and the Financial Services Authority for failing to take proper steps to protect policyholders.

    At Commons question time earlier today, Tory MP Andrew Mackay asked why the Prime Minister had 'clearly and twice repeated' that there would be a statement by Christmas.

    Mr Pearson said: 'I had hoped that we would have been able to make a statement on Equitable Life before the recess.

    'It is a matter of regret to me that we haven't been able to do so and I would like to apologise to the House and to the Prime Minister that it has taken a little bit longer than I would have liked to get the policy options to a stage where we can make a firm decision and issue a statement.'

    Miss Harman also apologised for telling MPs the Equitable Life statement would be released in the autumn.

    'I'm sorry it wasn't available when I said it was going to be available,' she told MPs.

    'But what happened is that it wasn't complete and therefore my announcement to the House was contingent on it being finished.

    'It's not as if it's complete and we're just sitting on it - that's the point I want to make.'

    Shadow Chancellor George Osborne said: 'Even in Parliament, Gordon Brown's word is worth nothing.

    'He has broken the promise he gave just days ago and betrayed thousands of Equitable Life savers waiting for justice.

    'The Parliamentary Ombudsman's report is a damning indictment of Gordon Brown's failings as Chancellor and we don't have to wait until after Christmas to know that the recommendations should be implemented and savers should be treated fairly.'

    Daily Mail, by James Chapman 18th December 2008

  • Equitable Life is everyone's problem

    The government would like you to think that Equitable Life is an ancient scandal whose victims were so well-heeled they barely deserve sympathy, let alone compensation. Don't be fooled. Equitable - or more precisely the government's handling of the affair and its treatment of the policyholders - matters to all of us.

    Gordon Brown said a few days ago that the Treasury would respond before Christmas to the Parliamentary Ombudsman's report, published in July. It was full of excoriating criticism of the regulators and recommended the government set up a compensation scheme and apologise. That leaves only days before Parliament breaks up on 18 December - unless, of course, the Treasury continues its strategy of shameless stalling.

    I hope Brown sticks to his promise. More than that, I hope he has reached the only right conclusion: to make proper redress to policyholders. Everyone knows that the public purse is under severe strain; full compensation for Equitable could cost £4bn, which will be hard to find. Nonetheless, the government has an obligation to treat victims fairly.

    The Ombudsman, Ann Abraham, found catastrophic failure by the regulators over 10 years. Her report only saw the light of day in the summer, after a four-year wait caused in large part by 500 pages of prevarication - er, I mean detailed challenges - by the Treasury, the FSA and the government actuary's department. The longer it drags on, the greater the distress of elderly policyholders.

    Equitable's bosses and its policyholders fear there will either be yet more delay or a token, means-tested hardship fund that would only help the poorest. That is not good enough. Not all the pensioners are rich, and even if they were such a wholesale regulatory failure is not made acceptable because its victims are middle class.

    The most worrying aspect of this sorry saga, however, is the prospect of the government defying the Ombudsman. Her office conducts independent investigations into the conduct of government departments and agencies, safeguarding the public and democracy itself. One obvious lesson from the credit crunch is that we need better financial regulation. How can we trust the government to achieve that if it disrespects its own watchdog, and effectively condones a decade of egregious failure by its regulators?

    Ruth Sunderland, The Observer Sunday 7th December, 2008

  • "The final chapter for Equitable Life? Is the Equitable Life saga finally staggering to a conclusion? We have had the report of the Parliamentary Ombudsman and are now waiting for the government's response to that……….

    In the meantime, both the Equitable Life board and the Equitable Members Action Group have been busy inside Parliament. They have both appeared before the Public Administration Select Committee PASC) and the All Party Parliamentary Group on Insurance & Financial Services……..The two All Party Group meetings have attracted over 30 Parliamentarians and have been surprising in both their tone and content.

    The meeting with Vanni Treves (chairman) and Charles Thomson (chief executive) was a rather chaotic affair as the members… It did, however, give Equitable a very fair hearing and welcomed its four square support of the Ombudsman's key recommendations of a full apology for the maladministration by the Department of Trade & Industry, Government Actuary's Department and the Financial Services Authority and the creation of a compensation scheme…

    The one thing they would not be drawn on was the size of the compensation package, restricting themselves to observing that it could range from "very little to billions" depending on how far the government believes maladministration was the problem and how far the society contributed to its own downfall.

    The Equitable Members Action Group, on the other hand, didn't get as sympathetic a hearing as might have been anticipated. In particular, backbench Labour MPs do not seem to take too kindly to them, one criticising the tone of their lobbying as akin to "the language of an angry 19th century landlord".

    Not surprisingly, EMAG also agreed with the Ombudsman that there had been maladministration a-plenty and that compensation from public funds would be necessary to rectify this wrong. Unlike the Equitable board, however, they were prepared to put a figure on it: £4.6bn…

    A fast-track option appeals to some MPs but I got the impression that EMAG feels this could lead them down a road towards being forced to accept lower levels of compensation. Where there was some agreement was in the need to avoid a claims process that relies on policyholders submitting detailed claims to a commission.

    EMAG doesn't like this idea because it feels that many of the now elderly policyholders would be intimidated by the prospect of filling in lengthy and complex claims forms. At the previous weeks' meeting with the board, several MPs made clear their unease at a claims-led process because of the scope for this being hijacked by ambulance chasing law firms…

    Some MPs, and I got the feeling the Equitable board, would be happy for the government to short-cut a long-winded compensation process by creating an "assistance" as opposed to a "compensation" scheme with a fixed amount of money that the compensation commission would be told to distribute as fairly as possible. This would avoid the government having to admit liability on behalf of any of the public bodies named in the Ombudsman's report and skip the potentially lengthy detailed assessment of all the claims from Equitable policyholders.

    It would also have the supreme attraction to the government of being able to keep tight - if not total - control over the amount it pays out, eliminating the potential for upward drift if it allows a compensation commission to work through hundreds of thousands of individual cases. The big question is: how much?

    Clearly, anything less than £4.6bn isn't going to satisfy EMAG, the main policyholders' representative body, although others have suggested as much as £6bn is need to adequately compensate everybody. The Equitable board gently dismissed these figures as being off the scale, but wouldn't be drawn on one of their own…

    David Worsfold, Incisive Media 24th November, 2008

  • Labour MP demands jail for Equitable debacle. Those responsible for the failure of Equitable Life should have faced imprisonment as result of their actions, a Labour backbencher has claimed. During a Public Administration Select Committee meeting held last week Gordon Prentice, MP for Pendle, said he was astonished those accountable for the demise of the mutual insurer had not been severely punished.

    Quoting the Parliamentary Ombudsman’s report into Equitable Life, Mr Prentice said the returns submitted by the insurer were inaccurate and misleading.

    He said:
    "I find it astonishing that the taxpayer may be asked to stump up £10bn and no-one is behind bars over this because there is no fraud. I just find it astonishing that there is no-one in the dock over this failure. Is it not astonishing that the tax payer is being asked to pay £10bn and we cannot point a finger at anyone. The person at Equitable Life who was both the managing director and the appointed actuary, the worst that happened to him, Roy Ranson, was that he was struck off the Institute of Actuaries in 2007, years and years after the event."

    …………During the meeting Julie Morgan, Labour MP for Cardiff North, asked the panel whether the ombudsman's timeframe of compensation being paid to Equitable Life of within two years was feasible. Both Mr Winsor and Sir Howard said it was a necessity to meet this deadline and it would be unfair to drag out the situation any longer.

    Mr Winsor said:
    ".... The regulators are the creations of Parliament. They are the custodians and stewards of a precious public interest. They are part of the apparatus of government. They are given functions and duties and they must adhere to standards, high standards - standards which in this case have been found to have been woefully neglected. There is a considerable degree of public interest, public trust, public confidence, public reliance, in the regulators doing their job properly. If regulatory failure is the direct and proximate cause of people sustaining loss, then my view is the State should pay financial compensation. Yes, in this case it is a lot of money. If it were £10 million and not £10 billion, the Chancellor would probably write a cheque to make the problem go away. The degree is not relevant. The principle is. The State has failed these people and the State should compensate them. Justice requires it. Justice at the discretion of ministers is not justice. Justice delayed is justice denied."

    David Pawsey, Financial Advisor 20th November, 2008

    Read the full transcript of the select committee on Public Administration’s session on Equitable (13th November 08) with so called experts on regulation.

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

    It's been a great earner for lawyers but a disaster for savers. The good news – and I must be careful not to raise false hopes here – is that a sense of urgency seems to be emerging from the latest team sent to investigate this scandal: the House of Commons Public Administration Select Committee. I know because of what I heard after they summoned me to give evidence this week. Nobody in their right mind enjoys being grilled by a Select Committee but I was impressed by most of the MPs' evident desire to get at the truth.

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

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

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

    Phew. Apart from that, Mrs Lincoln, what did you think of the play?.............

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

    No wonder the savings ratio in this country has collapsed during the decade since Equitable tried to wriggle out of its promise to policyholders from about 10pc of household income to nearer 2pc now. Savers are on strike because they can see prudence does not pay…………………

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

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

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

    Ian Cowie, Daily Telegraph, 14th November, 2008

  • "Equitable Life halts sale of £6bn fund
    Equitable Life, the troubled mutual life insurer, halted the sale of its £6 billion with-profits fund yesterday after a year of trying to find a buyer for the business. Equitable, which is the UK's oldest mutual insurer, blamed its change of heart on the economic downturn.

    A policyholders' spokesman said he was relieved that Equitable was not pressing ahead with a sale in the present poor market conditions.

    The society, which has 500,000 policyholders, said it had received several approaches to buy its remaining assets. "Given the current financial and economic climate the board decided that none of the various proposals received would be certain to provide improved prospects for policyholders,” the society said.

    Equitable will now focus on putting the fund into "run-off”, which is where an insurer continues to run policies until they mature. The insurer offered its assets for sale after transferring £1.7 billion of with-profits annuities to Prudential and £4.6 billion of non-profit pension annuities to Canada Life.

    However, Vanni Treves, chairman of Equitable, said: "Having carried out this important test of our options for improving prospects for our policyholders, we will now focus on a stable and secure run-off of the society."…

    Paul Braithwaite of Equitable Members Action Group, said he was not surprised the mutual had been unable to find a buyer and he was relieved at the decision to halt the sale.

    Mr Braithwaite said: "It's actually quite a relief that Equitable have halted the auction process because any deal that would have been made in the current market conditions would have been a fire sale."

    He said policyholders had also been concerned at the type of bidders that might have emerged. He said: "We are a mutual society - the UK's oldest mutual - and we would not have been happy at any proposals that would have ended our mutual status unless there was a very definite upside."

    He added that policyholders were "currently much more interested in the Government's response to the Parliamentary Ombudsman's report, which recommended that the Government should compensate Equitable policyholders"…

    Mark Atherton, The Times 28th November 2008

  • Equitable Life members step up pressure on Gordon Brown for £4.5billion bail-out.
    More than a million Equitable Life policyholders are still waiting to hear whether the Government will compensate them for losses incurred as a result of the near-collapse of the mutual eight years ago.

    Three months ago, Parliamentary Ombudsman Ann Abraham produced a damning report into the involvement of the Financial Services Authority, the Government Actuary's Department and the Department of Trade and Industry in Equitable Life in the years leading to its sudden closure to new business in 2000.

    She accused them of maladministration -- failing to spot that Equitable Life was in dire straits through much of the Nineties - and called for compensation for policyholders who saw the value of their plans shattered as Equitable Life's management struggled to keep the mutual afloat. The cost of compensation is estimated at £4.5billion.

    Though the Government promised to respond to Abraham's findings by the autumn, when Parliament returned, it has yet to do so. Kitty Ussher, who made the pledge, has been removed from her position as Economic Secretary to the Treasury. A decision on compensation now rests with her replacement, Ian Pearson.

    The Treasury refuses to confirm to Financial Mail whether a date for a response to Abraham's report has been set. A response could be delayed until mid-December.

    The Government's tardiness has upset many Equitable Life policyholders, some of whom voiced their anger at the AGM of the Equitable Members' Action Group in central London on Tuesday.

    EMAG has spent the past eight years battling for compensation, but in the wake of Abraham's report has increased its lobbying of MPs in an effort to put more pressure on the Government......

    Paul Braithwaite, EMAG secretary, is confident the Government will have to agree to a compensation plan. EMAG wrote to 180,000 Equitable Life policyholders after Abraham's report, urging them to contact their MPs and ask them to press the Government for compensation. EMAG was backed by Equitable's board, which also called on members to contact their MPs.

    The pressure group demonstrated at Labour's party conference in Manchester last month, carrying a coffin to symbolise the policyholders who have died while waiting for compensation.

    Braithwaite says: 'Our case is stronger than ever. The Government has bailed out Northern Rock as well as Bradford & Bingley. It has £37billion to bail out our biggest banks and it provided a 100 per cent guarantee to savers with Icelandic bank Icesave.

    'It would not make sense if it now turned round and excluded us from compensation. If it refuses to act on Abraham's recommendation, we will kick up an almighty stink. We will not go away.'

    Over the next few weeks, the influential Public Administration Select Committee will hear evidence on Abraham's report. It is likely to put more pressure on the Government to pay up.

    In a separate move, Phil Willis, Liberal Democrat MP for Harrogate and Knaresborough in North Yorkshire, has tabled an early day motion urging the Government to implement the Ombudsman's recommendations. It has drawn support from more than 50 MPs.

    EMAG has set up regional groups to put pressure on MPs to support the case for compensation . Equitable policyholders can find details at www.emagregional.org.uk

    By Jeff Prestridge, Mail on Sunday
    26th Oct 2008

  • Mrs. Teresa May: ....In July, I asked for a statement from the Chancellor on the ombudsman’s report on Equitable Life. Yesterday, the right hon. and learned Lady ignored two questions on Equitable Life. The ombudsman has clearly stated that the Government must take some responsibility for the failures in Equitable Life and should be compensating policyholders, so may we have an urgent statement from the Chancellor apologising for the Government’s failures and setting out the compensation scheme for policyholders?

    Ms Hariet Harman: ....The right hon. Lady asked about the ombudsman’s report on Equitable Life. On 8 October, the Chancellor repeated what he had said in the summer, after the ombudsman’s report was published: this was an extensive and important report, and that he would make a statement on the Government’s response in the autumn. That remains the case.

    Mrs. May: But it is the autumn.

    Ms Harman: Indeed. The right hon. Lady is absolutely right— it is the autumn.

    Mrs. May: So where is the statement?

    Ms Harman: Autumn has not finished yet……………..

    Hansard: Wednesday 15 October 2008

  • "It's An Inequitable Life: Icesave vs. Equitable

    Take a group of ordinary, British savers. They’ve studied the ‘best buy’ tables, and they put their money into a financial institution that promises first class returns. The company concerned seems sound, safe and sensible. Until -- with shocking suddenness -- it goes pop. A series of official inquiries, the latest by the Parliamentary Ombudsman, subsequently highlights maladministration by the British government as a critical causal factor.

    Take another group of ordinary, British savers. They too have studied the ‘best buy’ tables, and put their money into a financial institution that promises first class returns. The company concerned seems sound, safe and sensible. Until -- once again with shocking suddenness -- it too goes pop.

    The second group of savers are those who put their money in Icesave. It's not yet clear whether maladminstration by the Icelandic government has played a part in Icesave's collapse. But it is clear that all retail savers in Icesave will be compensated - even those who had put more money in than the amount guaranteed by the Financial Services Compensation Scheme.

    Meanwhile, the first group of savers, who’ve lost out due to what the British government’s own Ombudsman describes as “a decade of regulatory failure”, are left dangling in the wind.

    That, in short, is where the Equitable Life compensation debate stands today. The Ombudsman’s report, published in July, is still awaiting a response from the Treasury -- a response promised for some time this autumn.

    What will that response be? For Equitable savers, the omens don’t look promising.

    On October 8th, for example, Labour MP Gordon Prentice asked Alistair Darling, the Chancellor of the Exchequer, pretty much the same question: “Given that we are compensating people who lost money in the Icelandic banks, should we look again at the collapse of Equitable Life -- which, the parliamentary ombudsman tells us, was a result of a decade of regulatory failure?”

    The Chancellor's response wasn't encouraging. The collapse of the Icelandic banks was down to 'systemic problems' in the banking industry, he averred. In contrast, he noted, the Penrose Inquiry had found that "Equitable Life ... was substantially the author of its own misfortunes." Oh dear. "We have a duty to treat policyholders fairly, but, as people have been saying today, we also have a duty to be fair to taxpayers," he concluded. "I will report back to the House as soon as I can."

    Hang on, though. Wasn’t Northern Rock also the author of its own misfortunes? Not to mention Bradford & Bingley, another adherent of a flawed ‘borrow short, lend long’ business model? Not to mention, it appears, Landsbanki, the owner of Icesave, and Kaupthing, the owner of Kaupthing Edge?

    And what about the awkward fact that the Penrose report -- now four years old -- has been largely superseded by that of the Parliamentary Ombudsman?

    For Equitable savers, there’s another piece of gloom, too: the timing of the Prime Minister’s latest government reshuffle. The hard-working committee of the Equitable Members’ Action Group briefed Treasury Minister Kitty Ussher earlier this month on their views regarding the Parliamentary Ombudsman’s compensation calculations -- only to find her then reshuffled out of the job. Oh dear, again.

    But despite these worrying portents, I’m now more optimistic about the prospects for Equitable Life policyholders than I have been for some time. (In the interests of full disclosure: I too am an Equitable Life saver.)

    Firstly, this is a government that talks a lot about ‘fairness’. The more it compensates other groups of savers -- especially those compensated over and above the limits set by the Financial Services Compensation Scheme -- the more unfair the treatment of Equitable savers appears.

    Second, the government has just spent billions on the biggest bailout in British history. Back in July, when the Ombudsman’s report first came out, the Chancellor might have been tempted to describe the amount of Equitable compensation -- variously estimated at around £4.5 billion -- as unaffordable. It plainly isn’t, because he has just spent over ten times that amount on the measures he announced on October 8th.

    Third, the mood among members of Parliament -- so far as one can tell -- seems increasingly inclined towards Equitable policyholders. Remember: they all have Equitable policyholders as constituents. Those constituents have been lobbying them all summer, and can now be expected to be lobbying them even harder.

    Fourth, at the Conservative Party conference, held earlier this month, the opposition said it would provide compensation if it won the next general election. I’m a business journalist, not a political one, but I think there has to be a fair chance that the next election will go the Conservatives’ way. Compensation maybe not today, then, but perhaps tomorrow -- provided that the Tories back their words with actions. And in government, they too will be swayed by arguments one to three above.

    But whatever the outcome, it will be too late for the 30,000 Equitable Life savers and annuitants who have already died while this sorry saga has gone on -- for nine years now, and counting. And the longer it does go on, the fewer people will eventually benefit: 15 more savers and annuitants die every day, according to the Equitable Members’ Action Group.

    Malcolm Wheatley in Retirement and Pensions 13th October, 2008

    See also, The Times 10th October: "Opportunity to make compensation equitable".


    HAVE YOU CHECKED OUT YOUR LOCAL EMAG GROUP YET? - www.emagregional.org.uk

  • "Regulator 'mesmerised' as Equitable headed for disaster. Parlimentary Ombudsman Ann Abraham has launched a stinging attack on the Government, accusing it of complacency in its regulation of Equitable Life and ignoring warning signs that the UK's oldest insurance mutual could sink.

    Comparing Equitable to a ship about to go over a waterfall, she accused the Government's regulators of being "mesmerised" by the society and watching a disaster occur prior to its near-collapse in 2001.

    "Here was a long-established, extremely well thought of, highly successful society that had been that way since anybody could remember," she told the Public Administration Select Committee. "Somehow, although the stark facts were in front of them, they couldn't quite believe it. There was a sort of sense that 'somehow it will come right'.

    "The regulators were on the bank watching this pleasure steamer sailing over the edge or towards the edge of Niagara Falls. All of the information was there in front of them, and they could even see this boat taking on more passengers. But it was heading for disaster.

    "But somehow, there was a sense, because it was Equitable, they were somehow going to do a miraculous U-turn. There was a sense that this was Equitable and it could not go down."

    Ms Abraham's stinging words were the first public comments she has made since July, when she unveiled a damning investigation into Equitable's fall from grace. In its heyday, Equitable had 1.5m policyholders but was forced to close to new business after being unable to pay guaranteed annuities.

    The select committee yesterday began an examination of her report, which said the regulators – the Department of Trade and Industry (DTI), the Government Actuary's Department (GAD), and Financial Services Authority (FSA), acting on behalf of the Treasury – were guilty of "comprehensive failure".

    The report, which runs to 2,819 pages, called on the Government to establish and fund a compensation scheme for policyholders following "serial regulatory failure". It is seen as the best chance of Equitable policyholders winning compensation after the society's near-collapse society seven years ago, which saw members lose up to half of their life savings………..

    Yvette Essen, Insurance correspondendent Daily Telegraph 31st October, 2008

  • “Equitable policyholders in protest

    Policyholders of Equitable Life staged a protest at the Labour Party Conference calling for the Government to compensate them.

    The group, which carried a coffin and wore T-shirts saying "30,000 dead waiting for justice", demanded that the Government act on the Parliamentary Ombudsman's recommendation to pay them redress. They said the coffin, which bore the words "It wasn't an Equitable Life after all, Henry", represented the 15 Equitable Life pensioners who die every day.

    Protester Paul Weir said: "We've been waiting seven years for the Government to do the right thing - its cynicism in setting up delay after delay has got to stop.

    "Two months after the Parliamentary Ombudsman found Government regulators guilty of 10 counts of maladministration, the Government has yet to respond and while they play for time, 15 Equitable pensioners are dying every day who will never see a penny in compensation."

    In July the Parliamentary Ombudsman Ann Abraham published her long-awaited report into the Government's regulation of Equitable life.
    Her report found evidence of "serial regulatory failure" for more than a decade, and she said the regulators' actions were "largely ineffective and often inappropriate" despite them being aware of the society's growing problems.

    She called on the Government to apologise to Equitable policyholders and compensate them for any money they lost as a result of its regulatory failure.

    The Government said it would not respond to the report until the autumn.

    Press Association 24th September, 2008

  • “Equitable policyholders have proof of losses”

    Equitable Life policyholders should be able to prove that they sustained losses and claim compensation according to figures from the latest pensions survey.

    The survey of results, published in the supplement accompanying the October issue of Money Management, shows massive falls in the payouts on Equitable Life with profits policies.

    When the parliamentary ombudsman published her report on the near collapse of Equitable Life in July, she said that in order to obtain compensation, policyholders would have to show that they suffered an identifiable or quantifiable loss either in absolute or relative terms.

    The survey shows that for longer term policies, taken out 20 years ago, the payouts on the Equitable Life regular contribution plans had fallen by £3,437 over the past year, and was now fifth from the bottom of the table.

    A year ago Equitable's results fell by £4,996 meaning a total reduction in payout of £8,433, a 9% fall in the space of two years.

    The results are much more startling for single contribution plans. For policies taken out 15 years ago the results have dropped so dramatically that they have halved in the space of one year.

    The Equitable Life results are all obtained from Form 59 of its annual returns to the FSA, since it declines to complete questionnaires.

    Just one year ago, the Equitable Life 15 year single contribution with profits personal pension plan was paying a maturity value of £20,736. But 12 months later that payout had dropped to £11,964, a fall of 42% over a year.

    Equitable's submissions to the FSA are obviously asumed to be correct. It is also asumed that the FSA is not asleep on the job and that it would take urgent action if the figures were found to be wrong. In either case, such a downturn in the payouts should surely raise alarm bells at the regulator.

    Over the 20 year term the picture is just as bleak. The Equitable payout is down £3,805 on a year ago, which itself was down £6,244 on the previous year. This makes a total loss of £10,049, a reduction in payout of 19% over the past two years and the fourth worst return in the Table.

    Although the reductions in payouts of the Equitable policies are not the biggest, they represent a colossal fall from grace for the once highly revered life office.

    In the Money Management 1998 survey, Equitable was an average performer across these terms. Now it is last or less than half a dozen places above the minimum payout. These figures may, therefore, provide Equitable Life policyholders with a justifiable compensation claim on the grounds of relative “

    Janet Walford in FT Adviser 19th Sept, 2008

  • FSA "betrayed" Equitable victims

    In the wake of disturbing revelations buried deep in the Parliamentary Ombudsman's report into the regulation of Equitable Life, policyholder action group EMAG today accused the FSA of betraying Equitable policyholders.

    A new analysis by former EMAG chairman Alex Henney reveals that in July 2001 the FSA and Equitable were making preparations to put the Society into administration.

    Click here to download the report.

    On 25 July 2001 there was a meeting between the FSA, the Treasury and the Bank of England regarding whether there were arguments for an injection of public funds into Equitable. The note of the meeting records: '[FSA's Chairman] said that something between £3 and £5bn would make [Equitable] solvent. [FSA's Director of Insurance] said that it was difficult to assess what additional contribution to the pot might be necessary to make an S425 scheme attractive to [Equitable] policyholders. But while the insurance industry would probably not be keen on a rescue, it might be readier to consider this if the government was involved. [FSA's Chairman] said that if the government put money into the company, it would be interpreted as a problem with the past regulatory regime'.

    But in a matter of days the FSA had managed to persuade itself that Equitable was still solvent after a series of emails between them and the insurer. In a few weeks its liabilities were downgraded from between £3 and £5bn to just £220m and the FSA allowed the use of a worthless reassurance treaty to paper over the hole in the Society's books.

    "This forensic analysis of the PO's report reveals the truly shocking depths to which the regulators time and again, acted directly against the interests of policyholders" said Paul Braithwaite of EMAG (Equitable Members Action Group). "Throughout 2001, the FSA should have been whistle-blowing but instead they abrogated their statutory duty to protect investors. We were betrayed."

    Braithwaite added: "Questions will be asked as to who was responsible in the FSA and Treasury right up to the involvement of Ministers and explanations must surely be forthcoming from the Government."

    The analysis claims that the FSA did not reveal its concerns about the state of the Society's finances to policyholders and encouraged the Financial Ombudsman Service (FOS) to toe the line by supporting Equitable rather than policyholders in its handling of complaints. Later when the compromise scheme was announced the FSA stood by while policyholders were given a less than full picture about the value of the "uplifts" they were asked to accept in return for giving up their valuable legal rights.

    The Parliamentary Ombudsman commented "the misleading information, about the Society's solvency position and its record of compliance with other regulatory requirements, that was produced by the FSA, acting on behalf of the prudential regulators, during the period after the Society closed to new business, constitutes maladministration".

    This raises the question of whether the FSA knowingly condoned a Compromise that was based on a pledge to policyholders that could not be honoured.

    The new report also suggests that at the time of the compromise, the Society did not actually have sufficient funds even to pay the uplifts being promised to members, calling into question the integrity of the compromise. The uplifts (and more) were removed by the need for a second policy fund devaluation in April 2002, within just six weeks of the uplifts being added – despite no change in the state of the stock-market between November 2001 and that devaluation.

    Henney's report "How the FSA and the Treasury betrayed Equitable's policyholders" reveals the dizzying chain of events that took place in July 2001, as the Treasury, the FSA and the Equitable's directors considered putting the Society into administration but desperately sought to find a way to keep it in business.

    Equitable Policyholders Accuse FSA of `Betrayal' Read Bloomberg press story here.

  • “Thank you for your email of 16 August regarding Equitable Life. I am sorry to read that you are one of the many Equitable Life policyholders who has suffered as a result of the company's dubious practices, and particularly as a result of the disgraceful regulatory failures and the Government's subsequent mishandling of the collapse.

    The Parliamentary Ombudsman's recent report was a damning indictment of the Government's handling of Equitable Life. It identifies serial regulatory failures, a number of which occurred between 1998 and 2001 when Gordon Brown and the Treasury had responsibility for the regulation of Equitable Life. The report makes it clear that prompt action could have been taken then which would have avoided the hardship that so many people have subsequently suffered.

    As you are probably aware, the Ombudsman makes two recommendations. The first is that the Government should make a public apology for maladministration. The second is that, because policyholders suffered losses due to maladministration, they should receive compensation from the Government. She advises that the next stage is to assess the basis on which payments to policyholders should be calculated and to whom these should be made.

    I believe the analysis provided by the Ombudsman in her report is thorough and rigorous. I support her recommendation that policyholders should receive compensation to put them back into the financial position they would have been in had the maladministration not occurred. I also support her recommendation that action should be taken promptly, within six months. This is critical in the light of the many years it has taken for a comprehensive enquiry to be completed. The Conservative opposition will be exerting strong pressure on the Government to move quickly on the Ombudsman's recommendations. If the Government continues to drag its feet on this we will act ourselves once a General Election result puts us in a position to do so.

    If you disagree with my position on this please let me know; I am committed to representing the views of constituents. In addition to writing to Government ministers, I am in regular contact with Conservative MPs and policymakers to advise them of the views of people in this constituency.”

    A good political response from a Tory in a marginal seat.

    Here's a Q & A on frequently asked questions.

  • Parliamentary Ombudsman's report
    Equitable Life: A decade of regulatory failure

    “Dear Member,

    The Parliamentary Ombudsman recently published her report into the failure of the regulation of Equitable Life. We felt it important to let you know our views.

    The report

    The Parliamentary Ombudsman investigated the actions of the regulators of Equitable Life (including the Government Actuary's Department) during the 1990s. She summed up her conclusions in the title of her report - "Equitable Life: a decade of regulatory failure".

    Her central recommendation is that the Government should set up and fund a compensation scheme with the aim of putting "people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred."

    She does not make this far-reaching recommendation lightly. She recognises that payment of compensation must come at the expense of the Government which will always have priorities for the use of tax-payers' funds. She has spent 4 years investigating and compiling her report including a careful consideration of the responses of the regulators to drafts of the report during the process. Yet, she has unequivocally recommended the establishment of a compensation scheme.

    You can read the report for yourself on the Parliamentary Ombudsman's website www.ombudsman.org.uk

    What next?

    The Parliamentary Ombudsman has made her recommendations to Parliament. It is up to the Government whether to accept and act on those recommendations. However, she has also invited Parliament to debate her report.

    Our response

    The Society fully accepts the Parliamentary Ombudsman's report. The depth and rigour she has applied (it runs to over 2,800 pages) and the degree of maladministration she has revealed (10 separate counts stretching over a decade) makes her recommendations reasonable and proportionate in our view.

    We shall be lobbying MPs in all the major parties to support the speedy implementation of the Parliamentary Ombudsman's recommendations. You can also help by contacting your MP.


    As Parliament is likely to debate the issue, we believe that it is important for MPs to understand the views of their constituents. We, therefore, recommend that you write to your MP and let him or her know of your interest in the issue. MPs of all parties are always strongly influenced by the views of their electorate. If you do not know how to contact your MP, you can find out on the internet by entering your postcode at www.theyworkforyou.com. Alternatively, you can telephone the House of Commons Information Office on 020 7219 4272. They will tell you who your MP is and give you the address to write to.


    We believe that if many policyholders write forcefully to their MPs the prospects for securing Government compensation will be improved. We also believe that it may speed up the process.

    You need to be aware that the Ombudsman has not concluded that all policyholders have suffered a financial loss. However, she does believe that in many cases "a loss has been sustained, relative to what would have transpired had those individuals saved or invested with a comparable with-profits fund." It is intended that the detailed rules will be determined by an independent compensation scheme.

    If you have any questions relating to this letter please call 0800 408 0097 (or 00800 1020 1040 if calling from outside the UK).

    Yours sincerely.
    Vanni Treves and Charles Thomson

    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

  • “As an EMAG member and Licensed London Cab Driver I took your advice and protested to a Member of Parliament.

    Driving down Whitehall on the last day that Parliament sat I was hailed by Alistair Darling.

    He was a little surprised when asked by me "and when will I get compensation for my Equitable Life Pension"?

    "I will do what I can" was his reply.

    I retorted "we are not all barristers you know!"

    The conversation might have put him off his "last day of school" meal, it certainly cheered me up and I hope you enjoyed the anecdote.

    Thank you all at EMAG for the fine work you are doing in trying to get compensation from one of the worst administrations since the war."

    (An email received by EMAG from a member)

  • “Own up and pay up is the simple message from Equitable Life policyholders. There is at last real hope for compensation for hundreds of thousands of people who were Equitable Life policyholders when the mutual society virtually collapsed seven years ago.

    The Equitable Members' Action Group (EMAG) was formed in the summer of 2000 and it seeks to represent all investors, past and present, whatever their type of policy, in the pursuit of compensation from Government. In 2004 we fought for a second report by the Parliamentary Ombudsman (PO) into the regulation of the society. With the report finally coming out a fortnight ago, finding the Government guilty on 10 counts of maladministration and injustice and calling on it to set up a compensation fund, justice could finally prevail.

    We are delighted with the sure-footed rigorous report, which must be the soundest and proudest achievement of the PO's office and a credit to all involved. But that office is under siege. Its last three reports were initially rejected by this Government. Eventually, through the determination of the protagonists and the support of fair-minded back-bench MPs and the media, those reports have been honoured by a reluctant Government.

    The last one called for compensation for 150,000 people who lost money when their occupational schemes failed. In that closely parallel case, complainants won £3bn in compensation this January - with no outcry about the public purse. There is a mis-match between what the Government says about rekindling trust in politicians and its disposition to Parliament's own Ombudsman. What is the point of the PO if the Government repeatedly shows two-fingered contempt for the office?

    This latest 2,819-page PO report on Equitable boils down to two crystal-clear recommendations: the public regulatory bodies should apologise and the Government should set up a compensation fund immediately under an independent tribunal. It was depressingly predictable that the Treasury, which had the draft report 17 months ago, should play for time and say it will not respond until the autumn. Its strategy ever since 1998 has been to stuff the policyholders with all the losses and spin that they were all "fat cats" who could afford to bear the losses.

    When the society closed its doors there were two groups: one of about one million policyholders with an average of £4,000 invested in additional voluntary contributions (AVCs) or group schemes and the other, 500,000 serious savers for retirement with an average pot of £45,000. Today, that would buy an annuity of about £70 per week - hardly fat cat. And what of those smaller investors? There were, for example, many thousands in the NHS's AVC scheme with a few thousand pounds - nurses and hospital workers who could ill-afford their average loss of 15pc.

    Inevitably, with everyone nervous about the economy, there's a predisposition against the public paying up, especially after the tens of billions the Government has dubiously risked in bailing out Northern Rock.

    It's unfortunate timing that an investigation into regulation in the 1990s has been so delayed by Government sophistry that it has appeared only after seven years. But it's a sad fact that the Equitable victims are ageing and dying - 30,000 so far, with an estimated hundred more each week. This is why time is absolutely of the essence and the PO was right to emphasise the need for urgent resolution.

    It's been suggested that investors in other lifecos have equal claims for disappointing results. If so, where's their outcry? Equitable has been subject to no less than a dozen substantial reports before the PO's office.There have been none into competitors, precisely because Equitable was unique. Equitable grew almost exponentially through the 1990s, starting with a £6bn with-profits fund. A decade later it had over a million new policyholders and a massive extra £20bn added, all invested after the regulators could and should have warned us off or closed the fund.

    Equitable Life was where trust in our regulators and the UK's financial services industry broke down. If it had been addressed honestly and swiftly, the Northern Wreck may not have happened. The damage done is incalculable and ongoing. The Government must be made to change its policy of prevarication and face the fact that this can't go on - enough is enough.

    Victims should not only sign up to The Daily Telegraph's petition but, more importantly, take the time to write to MPs expressing their outrage and an expectation that their MP will support the PO's recommendation on compensation.

    Further, readers can show support by registering with one of 20 new regional pressure groups and by joining EMAG. Without our members' backing we certainly would not now have the real prospect of justice.

    EMAG's message to Parliament is simple - to start to rebuild our trust, change the record, own up and pay up.”

    Paul Braithwaite, General Secretary of (EMAG)
    The Daily Telegraph 28th July, 2008.

    To read the full article as submitted.

  • “Frankly, I don’t recognise the FSA I’ve heard described here this morning. NO mention of Equitable Life and the Parliamentary Ombudsman’s recent report??

    For the past six years I’ve come along to these annual public meetings and asked questions about the regulation of Equitable Life and FSA complacency. I’ve received platitudinous replies from a stream of different executives. Well, finally, my aspersions have now been TOTALLY vindicated, by Parliament’s very own Ombudsman’s Report, last week.

    I don’t think that the industry gathered here today will be in the least bit surprised by Ann Abraham’s damning findings. The damage done to this industry by Equitable Life and to the UK’s regulators is incalculable. And it will continue until the Government owns up and pays up and clears the slate.

    That well-respected Mail on Sunday financial editor, Jeff Prestridge, wrote last Sunday:

    “If the financial regulators showed half the passion for the truth as Ann Abraham does and a smidgen of her diligence, we certainly wouldn’t be in the mess we are in today – where the reputations of the Financial Services Authority and the financial services industry remain in tastters, and trust in both is broken…”

    So, here’s my question Mr Chairman:

    The FSA has been found guilty by the Parliamentary Ombudsman’s newly published report, entitled “a decade of reulatory failure”, on FIVE major counts of maladministration in the period to December 2001 – which I do recognise was not a period on your watch, Mr Chairman. But it is abundantly apparent from those most damning findings that the FSA’s attitude to protecting consumers is but a poor relative to its overarching preoccupation with maintaining confidence in the industry.

    Since 2001, in my opinion at the cost consequence of removing valuable checks and balances, the FSA has been laughably self-policing. Hence, any further sins on Equitable Life have never yet been brought to light. Despite the Tiner reforms and principles-based regulation, the FSA has humiliatingly had to admit to chronic failure in supervision just one year ago in the Northern Wreck.

    My own view is that the FSA should be stripped of Consumer Protection, but I recognise that that is a matter for Parliament.

    Today, I'd like to suggest that the board of the FSA and the respected incoming chairman, Lord Turner, who I see sitting on my right, itself volunteer that the FSA should become subject to the ongoing and retrospective remit of both the NAO and the Parliamentary Ombudsman, in order to begin to rebuild the almost non-existent public's trust in YOUR organisation, Mr Chairman."

    Paul Braithwaite’s verbal question put to chair Sir Callum McCarthy at the FSA’s annual public meeting 24th July, ‘08

  • “The final judgment: regulators, too, were far from Equitable.

    It was worth the wait.

    The Parliamentary Ombudsman's report into Equitable Life, which has taken four years to see the light of day, found catastrophic failure on the part of government regulators over a decade and has recommended an apology and a government compensation scheme.

    The specific findings of the Ombudsman, Ann Abraham, are damning. In the run-up to the crisis, the regulators were 'passive, reactive and complacent', failing to question Equitable's annual returns, failing to resolve issues over its solvency and failing to establish how it could afford to pay out bonuses. They also allowed its then boss, Roy Ranson, to run the company as a personal fiefdom.

    From 1998 to the end of 2000, when Equitable closed its doors, they were aware of problems but their actions were 'largely ineffective and inappropriate,' and they allowed the insurer to remain open on an unsound basis. They let it submit misleading returns, in which its apparent solvency position was flattered by a reinsurance deal which had 'no economic substance at all'.

    Most shocking, during 2001 the regulators gave a misleading impression to policyholders and the public by falsely stating that Equitable had always been solvent for regulatory purposes and by giving assurances that it had always met its other regulatory requirements.

    I can personally vouch for their complacency: at a lunch only days before the insurer shut up shop, I was shocked when one senior official opined that this would not be such a terrible outcome for savers.

    Seemingly, he was impervious to the damage this would cause not only to individual victims, but also to wider public confidence in pensions savings.

    Alistair Darling will not respond formally to the report until the autumn but the attitude of this government has been to resist claims for compensation, and to imply that the policyholders were 'well-heeled' and so somehow undeserving - an oddly Old Labour slant on the affair. The company, this argument goes, brought about its own misfortunes, so taxpayers should not be forced to pay for it.

    The men who ran Equitable were indeed primarily responsible, though the regulators have let them escape relatively lightly. Ranson was expelled from the actuarial profession last year, but he is in his late seventies and entitled to a substantial free pension from his former employer. On account of his age, he was not punished by the Financial Services Authority.

    His lieutenant, Chris Headdon, is serving a six-year ban meted out by the FSA from holding a senior position in the financial services industry. It expires in 2010, quite possibly sooner than the victims will receive payouts. He will be in his early fifties, still young enough to make more money to add to the £95,000 pension he is due to receive from the Equitable staff scheme.

    It is true that it will be hard - very hard - for the government to find the £4.6bn or so that policyholder action groups reckon will be needed to pay compensation. The budget deficit for last month was the worst June figure ever recorded, and people are questioning whether the Equitable victims are the most deserving recipients of scarce cash. My view is that compensation should be paid, despite the obvious difficulties.

    First, the notion that all Equitable customers are wealthy is not true. The average policy was enough to buy a pension of just £70 a week, not riches beyond the dreams of avarice. If some savers are a bit posh, so what? It doesn't make the persistent failures of the regulators more acceptable. Do people really believe it is OK for City regulators to fail horribly, and for the government to ignore the Ombudsman, so long as wrongdoers only milk the middle class?

    Second, the government is not being asked to bail out investors because of the misdeeds of the insurer's management, which would be morally hazardous, but because of the inadequacies of its own departments and regulatory bodies.

    Third, if ministers defy the Ombudsman, who provides a vital safeguard for the public, that will be an outrageous show of contempt for her office and its role in holding governments to account. It hardly encourages better regulation in the City if the government flouts its own watchdog.

    Ruth Sunderland, The Observer, Sunday 20th July

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

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

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

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

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

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

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

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

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

    The Independent, James Daley: 12 July 2008

    Note: Do follow the weeks excellent press coverage by clicking on the lhs MENU and highlight “Media Stories – Best Articles”. Also, follow the lead up by reading clicking on “Past Quotes”.

    Read the full article in the Independent and more press coverage from 12th July here

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

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

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

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

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

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

    Vince Cable, Liberal Democrat deputy leader, said yesterday:

    "Although the failure of the regulators occurred under the last Conservative government, a condemnation of civil servants by the ombudsman would be deeply embarrassing, not least if it includes a recommendation for compensation."

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

    Her findings will blame the now defunct Department for Trade and Industry, responsible for supervising Equitable until the end of 1997; the Treasury, which then took over supervision; and the Financial Services Authority, which took day-to-day responsibility for regulating insurance in 1999. The Government Actuary's Department, which provides actuarial services to government departments and was included in the scope of the review in October 2004, is also expected to be the subject of criticism.

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

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

    Note: Do follow the weeks excellent press coverage by clicking on the lhs MENU and highlight “Media Stories – Best Articles”. Also, follow the lead up by reading clicking on “Past Quotes”.

    Read the FT full article and more press coverage from 11th July here.

  • “Ombudsman to savage government and FSA over Equitable collapse

    · Darling put on stand-by for highly critical report
    · Compensation claims could amount to billions

    The government is gearing up for a battle with the parliamentary ombudsman over an expected highly critical report next week on failings by the Treasury and regulators that led to the collapse of the world's oldest mutual insurer, Equitable Life.

    The report, to be published next Thursday, is expected to find the Treasury, the Financial Services Authority and the government actuary's department to blame for not safeguarding investors' rights, which could lead to claims against the government amounting to billions.

    The report is understood to have found maladministration and breaches of rules by the regulatory authorities……..

    Alistair Darling, the chancellor, is planning to resist pressure to pay out billions in compensation to several hundred thousand Equitable Life policyholders by insisting that the government cannot be held liable for all the cash investors lost. Ministers who have read the report are already taking legal advice to see if they can limit their liability because they do not want another multibillion-pound bill following the bail-out of Northern Rock………….

    Now she has found there have been failures in Whitehall, which will add to government pressures at a time when money is scarce. The fact that the Guardian has learned that the report was sent straight to the chancellor suggests it is regarded as a serious headache for ministers.

    Last year, following a separate inquiry, the European parliament published a highly critical report which called on Britain to set up a compensation scheme for policyholders who lost money.

    Paul Braithwaite, general secretary of Equitable Members Action Group (EMAG), said: "After eight years of fighting for recognition that regulators were negligent, EMAG is delighted that the Treasury delays have finally been overcome and the report will come to light next week. We anticipate there will be recommendations of compensation, and the surprise would be if that were not so."

    Abraham originally indicated she would complete her investigation before the end of 2005, and campaigners have in the past claimed that the hold-up is down to ministers stalling for time. These suspicions were fuelled in late 2006 when she said it had become clear that some evidence "had not been disclosed to us". This "missing evidence" - later handed over - "was extensive and might be critical".

    Campaigners say the delays mean that an estimated 30,000 policyholders have died without finding out what happened.”

    David Hencke and Rupert Jones in The Guardian 10th July 08

    Read the whole article and 10 more newspaper stories published on 10th July.

  • “Ann Abraham's report into Equitable Life shows the buck stops with the Government.

    Ann Abraham's report into the collapse of Equitable makes damning reading. The conclusions, seen by The Daily Telegraph, will leave readers in no doubt next week, on official publication, that the buck must stop with the Government.

    Labour's filibustering when it comes to accepting the Government's share of the blame has heaped scandal on scandal for the million or so Equitable savers who have been left in reduced circumstances.

    Many of these are elderly people who have been left to eke out their remaining years in penury. Having stood behind the savers of Northern Rock, the Government has set itself an onerous precedent.

    Nationalisation was never the best route to take but, having failed to deliver a market solution for the lender, the Government must now live with the full implications of its actions. The Treasury can't bail out one set of savers and not another - both left high and dry by the same combination of failings.

    Of course the billions that the Government now faces in compensating Equitable policyholders could not have come at a worse time.

    Politically, it will highlight yet more failings by the Government in the world of finance and the public purse can ill afford yet another claim on it thanks to officialdom's mistakes.

    We, and most importantly Equitable policyholders, have waited years for the publication of Abraham's report. Alistair Darling and Gordon Brown cannot simply try to kick this issue into the long grass again.

    Maladministration by the Government contributed to Equitable's collapse and so, unfortunately for taxpayers, the Government should rightly pay compensation. But it must be paid quickly and without further delay for the sake of all those long-suffering Equitable victims who have waited years for justice.”

    Damian Reece, Daily Telegraph 9th July, 2008

    Read two further and more comprehensive articles, also in the Telegraph 9th July.

  • “With-profits, just without the profit....... In just over a week, Parliamentary Ombudsman Ann Abraham will deliver her much-delayed report into the Government's role in the near demise of Equitable Life eight years ago.

    She is expected to recommend compensation for those who invested in what they believed to be a financially healthy, well-regulated mutual only to discover too late it was anything but.

    Abraham is understood to have concluded that the Government was culpable of standing idly by, letting people continue to take out Equitable policies in the late 1990s when it knew the mutual was teetering on the brink of financial ruin.

    Though her recommendation of compensation will be welcomed by more than a million past and present policyholders, there seems little chance of Gordon Brown paying up. Two years ago, Abraham's call for compensation for the 125,000 victims of failed pension schemes was insensitively ignored by Labour, though in its defence it has since come up with a compensation package to appease most victims.

    Equitable Life campaigners - still laudably vocal eight years on - are expecting an almighty battle. Paul Braithwaite, general secretary of Equitable Members Action Group, says: 'We expect Brown to fight tooth and nail to avoid paying out a penny in compensation.'

    Commendably, EMAG is taking the initiative, setting up a network of regional 'action' groups to press local MPs to support their campaign. Equitable Life policyholders can obtain more details by visiting: emagregional.org.uk

    Jeff Prestridge in The Mail on Sunday, 6th July 2008

  • Fair play and pay for Equitable victims

    The near collapse of Equitable Life has become a forgotten scandal, but it is about to resurface in a way that promises to be deeply unpleasant for the government. In a couple of weeks, Ann Abraham, the Parliamentary Ombudsman, will finally publish her report into the affair after four long years; this document represents the last hope of government compensation for more than a million policyholders.

    Equitable Life is not just a cold case. It is part of a pattern of inadequate regulation, and of failure by the government to grasp the need for trust in the pensions system. There is also an important issue of accountability. The Ombudsman's function is to carry out independent investigations into complaints about government departments, but this is fatally undermined if those in power fail to act on her recommendations. There is no excuse for Gordon Brown - especially if he flouts her over Equitable.

    Comment, Ruth Sunderland, The Observer, Sunday 29 June 2008

  • “We're paying the price for Gordon Brown's fairweather policies

    One of the Bank of England's main jobs is to maintain "financial stability" by helping to supervise the banking system. On top of that, of course, the Bank's Monetary Policy Committee sets interest rates.

    The manner in which both roles are executed - regulatory and monetary - matters hugely. The quality of the Bank's decision-making affects practically every British citizen……

    In 1997, in his first act as Chancellor, Gordon Brown gave the Bank "operational independence", created the MPC, and switched interest rate powers from the Treasury to Threadneedle Street.

    At the same time, partly to smooth feathers in Whitehall, Brown set up the Financial Services Authority, a Treasury satellite, to oversee lending institutions. For decades, oversight of our banking system had been split between the Bank (providing brains and inside knowledge) and the Treasury (political authority and cash). But since 1997, the FSA has been involved.

    I'd contest that this "tripartite system" - three players, not two - was the root cause of the regulatory lapses behind Northern Rock. By leaving the Bank in charge of "financial stability", but denying it detailed knowledge about individual banks, Brown left the Old Lady "flying blind".

    While the Treasury denies this, last week's move to create a new "financial stability committee", an adjunct to the Bank of England's court, is an admission of the tripartite regime's failure.

    Chancellor Alistair Darling says the new committee will bring "valuable external assistance to bear on the Bank's decision-making". But if the bulk of its supervisory staff hadn't decamped from the City, and been hived off to the FSA, that wouldn't be necessary.

    …………with ministers refusing to admit the tripartite system was wrong, we remain in the ludicrous position where, when it comes to the power of the new stability committee, the Treasury says one thing and the Bank says another.

    After months of in-fighting, our post-Northern Rock regulatory regime remains a mess. The supervision of our banking system is being held together with a blob of political fudge. Meanwhile, billions of pounds of sub-prime liabilities are swirling around, the inter-bank market is still fused, and the integrity of our banking system remains very much at risk.

    Yet all ministers - and the Prime Minister - can think about is spinning themselves away from blame. The UK boasts some of the world's finest financial minds. We invented many of the cardinal principles of modern banking. Has it really come to this?

    This regulatory bust-up isn't only a disaster in itself. It also comes at the worst possible time. For ministers have insisted on lording it over the Bank just when we need Mervyn King's men to look as strong as possible……….

    Given all this, it is absolutely vital that the Bank of England is granted - and is seen to be granted - the ultimate authority to fight inflation. Ministerial calls for rate cuts, and semi-whispered comments about King, must cease. If the Bank raises rates, the Government needs to grin and bear it.

    We are now in a serious situation. The political games need to stop.

    Liam Halligan, Sunday Telegraph 22nd June, 2008

  • “Dear Chancellor,

    Last week the Parliamentary Ombudsman (PO), Ann Abraham, confirmed that she will lay her second report into Equitable Life before Parliament during the week commencing 14 July. The report, four years in the making, will be of great importance to those like our supporters who seek compensation from government for the gross regulatory failure which EMAG maintains caused the losses that they personally suffered in the near-failure of Equitable seven years ago and ever since.

    Could you please tell us if HMG intends: -

    - to respond to the report on its day of publication by means of a statement made in the Commons and, if so, will the statement be written or oral?

    - to hold a full debate on it in the Commons, before or after the summer recess?

    - Will both the statement and any subsequent debate also address the EQUI European Parliament's “Report on the Crisis of the Equitable Life Assurance Society”?

    If not, how and when does HMG intend to respond to EQUI, given that most of its 46 detailed recommendations on EU regulation fell outwith the remit of the PO? Thirteen months is far too long to have to wait for a response from HMG to this report which was adopted by an overwhekming majority of MEPs (609 to 11), representing all major parties and all 27 member states, in the Plenary session on 19th June 2007.

    When the President of the EU Parliament wrote to Gordon Brown last December pressing for HMG's response to the report you replied weeks later to say that HMG would continue to wait for the PO’s report. The Parliament and EMAG, as the progenitors of the Inquiry, expect HMG to honour its obligations and provide a reasoned and detailed response to EQUI.

    Yours sincerely,
    Paul Braithwaite, General Secretary of EMAG Ltd 9th June, 2008

    PDF of this letter

  • Exactly one year ago, Gordon Brown’s biographer Tom Bower wrote this in the Sunday Times, one month before Gordon Brown became Prime Mnister:

    “‘Yes, prime minister’ – is that all that Gordon Brown will want to hear from his civil servants? There exists some worrying evidence

    "Five weeks of panic” was one description of the mood inside Gordon Brown’s inner sanctum in early 2004. The chancellor had been briefed that Lord Penrose had delivered his report about the collapse of the Equitable Life insurance company resulting in losses of about £4 billion to 750,000 policyholders.

    To Brown’s alarm Penrose had circumvented his restricted terms of reference and partly blamed the government’s “ineffective’ regulator for the losses and condemned the “manipulation and concealment” by some managers. If the policyholders successfully sued the government, Brown was advised, the nation’s finances would be torpedoed.

    “Find a way to get us out of this,” ordered Brown in what has been portrayed as “ice-cold panic”.

    The events following Brown’s order raise serious questions about the next prime minister’s pledge to restore traditional, spin-free government and his promise to improve his acerbic relationship with civil servants. Having promised at the launch of his leadership campaign in May to “change the way we govern” Brown’s own record on Equitable Life suggests that his self-improvement will be a challenge.

    Gus O’Donnell, the Treasury’s permanent secretary in 2004, was the target of Brown’s rage and pleas. He was ordered to produce a “get out of jail card”, including a request to the Serious Fraud Office to consider prosecuting Equitable Life’s directors.

    O’Donnell organised the dispatch of the appropriate letter to Robert Wardle, the Serious Fraud Office’s director, but Brown placed him under pressure to do more. Irate MPs representing suffering constituents wanted Brown to answer their complaints personally in the Commons. O’Donnell was ordered to produce written answers that some believed would be distortive…………. over the next five weeks, O’Donnell constructed a wall of obfuscation and interminable delays. His success in orchestrating the protection of “Project Gordon” impressed the chancellor. O’Donnell’s reward was promotion to become cabinet secretary where he now awaits his new master.

    The chancellor’s delight was tempered when MPs referred the matter to Ann Abraham, the parliamentary ombudsman. But ever since 2004 the Treasury has inundated Abraham with submissions forcing repeated delays to her draft report, assumed to be critical of the Treasury. It recently delivered a 500-page schedule of objections. Brown’s spokesman called this an example of the Treasury “cooperating fully with the investigation” but insiders admit, “it’s a variation on ‘spin’. Gordon is spinning it out to buy time”.

    Cynics believe that even if Abraham criticises the Treasury Brown’s response will mirror his tactics after her recent finding of the Treasury’s maladministration towards occupational pensions. Through a junior minister Brown simply announced his disagreement with Abraham and refused to pay compensation.

    That did little to assure critics about Brown’s recent promises of “humbleness” and “new government”. The guide and guardian to restore probity across Whitehall will be O’Donnell himself. His fellow mandarins are asking whether O’Donnell has the strength to persuade the new prime minister to shed his lifetime’s habits. The omens are mixed.

    O’Donnell won promotion after witnessing the wreckage of his predecessor’s battles. ………”

  • The PO’s report into Equitable Life, four years in the making, will be made public in mid-July:
    For 18 months the Treasury has used every trick in the book to delay and derail this ticking bombshell report. After such deplorable tactics, EMAG is pleased that MPs will finally get to see the PO's report before their recess. Over the summer, hopefully, they will read it and reflect on the stark contrast between the shameful treatment of Equitable pension sufferers and their own gold-plated pensions. The breakdown in trust of regulators started with Equitable.

    Paul Braithwaite, EMAG’s general secretary said:
    “If, as EMAG expects, the PO recommends compensation measured in billions, the families of a million pension investors have every right to expect, as the European Parliament has made plain, that the UK Government will do the right thing and compensate the victims promptly. This scandal has been dragged out for seven years, during which time many thousands of Equitable pensioners have died waiting for recompense.”
    EMAG press release 1st June, 2008

  • Question at Equitable Life's AGM, Monday 19th May, 2008 from EMAG's Paul Braithwaite

    "I was personally very pleased to receive written confirmation from Alistair Dunbar on the 13th May on the issue of retention by the Society of all policy records, which of course you are legally bound under the law of contract so to do, in the following unequivocal way:

    “There have been no exceptions to the general policy of not destroying data since the new board has been in place.”

    (The board was ratified by the members at the Equitable’s AGM at Canary Wharf in May 2001)

    EMAG is delighted that you have been cooperating with the Parliamentary Ombudsman's investigation. And like EMAG, the Society has recently lodged a written response to the PO’s second report.

    As you know, EMAG had the courtesy to share our own confidential substantial submission with Charles Thomson a couple of weeks ago and we hope EMAG’s goodwill gesture will be reciprocated. We must surely agree, at this time, to make common cause to maximise Government compensation for all policyholders, present AND past, who suffered from maladministration by regulators - which EMAG has quantified to measure in billions of pounds.

    To this end, will you assure us, here and now, that you will open Equitable's books to the Parliamentary Ombudsman in order to help her arrive at accurate figures to help quantify the losses suffered on each individual’s policies?"

    Vanni Treves' answer: "YES."


    2001 Equitable Life Collapse
    2001 The Split Cap Debacle
    2004 Precipice Bonds Mistakes
    2005 L & G Fines Botch
    2008 Northern Rock Failure


    THE City's watchdog made an opportunistic play for more resources yesterday as it ritually purged itself over its part in the collapse of Northern Rock, writes Rupert Steiner.

    The Financial Services Authority has seen its budget almost double since it was started ten years ago, rocketing from £160m in 1997 to £301.7m for 2007.

    But even flush with extra cash the FSA, which is charged with preventing financial catastrophes, presided over a catalogue of disasters.

    During its short life its fines imposed on Legal & General were ruled excessive, it admitted to mistakes over its governance of precipice bonds, and failed to spot key problems at Equitable Life.

    The most humiliating, the Northern Rock debacle, saw its system of checks and balances failing to prevent the first run on a British bank for more than 100 years.

    But yesterday FSA chief executive Hector Sants used the publication of his own internal review of the shoddy handling of the Rock collapse, to push for more staff despite employee numbers having little to do with failings.

    This will mean a recruitment drive for up to 100 more regulators.

    The most shocking revelation contained in the report was that none of the FSA heads of department had met with Northern Rock since 2005. This has sparked a review of its relationship with so called ' high impact firms' to ensure there is no repeat of the Rock.”

    Rupert Steiner, Chief City Correspondent, The Daily Mail
    27th March, 2008

  • How regulation made markets riskier
    Here’s a by no means exhaustive list of financial scandals in the UK over the last 20 years: Barlow Clowes, BCCI, Barings, pensions mis-selling, endowment mortgages, the internet bubble and crash, Equitable Life, split capital investment trusts, Northern Rock.

    What do they have in common? All have occurred since the introduction of compulsory regulation of investment business in the UK, under the Financial Services Act of 1986, a system that was brought in to improve protection for investors.

    While the actors have changed, and the regulators have appeared under a veritable alphabet soup of acronyms – since 1986 financial market participants have had to deal with, amongst others, SFA, SIB, IMRO, LAUTRO, FIMBRA, the PIA, and now the FSA – it does not take a genius to reach the conclusion that our regulatory system doesn’t work.

    Northern Rock exposes flaws in tripartite system

    The latest collapse – the failure and nationalisation of Northern Rock – occurred under something called the tripartite system of financial sector regulation, which was introduced by Gordon Brown in 1997. This divided responsibility for the functioning of the markets between the Bank of England, the Treasury, and the FSA. When the bank got into trouble it very quickly became clear that there was noone in charge. The Bank of England governor was forced into a rapid U-turn on intervention, and the Chancellor was panicked into guaranteeing all Northern Rock’s deposits, committing the taxpayer to enormous liabilities. The FSA, in turn, had clearly failed in its duty as bank supervisor.

    The regulatory system will no doubt be changed yet again as a result of the Northern Rock affair – perhaps with another shuffle of initials and more work for the brass plate makers. But a fundamental question begs to be asked. What is the point of all these organisations and their rulebooks?...............

    Why a regulatory system may be damaging

    First of all there is the old problem of moral hazard. If people believe that the regulator will protect them or even bail them out, they are likely to behave more recklessly than otherwise. Equally, an investor may take the fact that an IFA, for example, or bank, has FSA approval as an implicit guarantee that they will not be mistreated. One doesn’t have to look very far to find plenty of examples which contradict this – all the scandals listed above occurred at regulated institutions.

    But it is also clear that having an explicit rulebook can make things worse. Take the current credit ratings scandal, where hundreds of billions of bonds were rated AAA by the main rating agencies when they shouldn’t have been (to clarify, AAA is supposed to mean a practically risk-free bond, with little chance of capital loss, whereas a number of recently issued “AAA”-rated mortgage issues have lost up to 40% in price).

    This only occurred because many regulations, for example those specifying how much capital a bank must hold against its loans, or those which set minimum ratings for a whole range of investment funds, specify a minimum credit rating. Under pressure to find extra returns for clients who were constrained in this way, clever bankers devised very complicated bonds and obtained the required ratings by making highly subjective assumptions about their likely performance. The fact that the credit rating agencies – themselves a part of the regulatory framework under US law - had a monetary interest in getting new bonds approved and issued compromised their independence and removed an important safeguard for investors.

    This is a classic example of “regulatory arbitrage” – where the mere existence of a rule encourages clever lawyers and bankers to find ways around it. Regulation in the USA, for example, under the SEC and the Financial Accounting Standards Board, has become almost entirely rules-driven, and an explosion of off balance sheet schemes to get round them has resulted. This has had predictable consequences – Enron, for example, was able to hide its insolvency for a long time by the use of such accounting schemes, and more recently banks have got into similar problems by using SIVs to push real economic exposures out of sight.

    More importantly, the overall effect has been a significant deterioration in the transparency of the financial markets, as noone knows which skeletons are lurking in whose closet. Banks and fund managers have become reluctant to trade with one another, as noone trusts the financial health of the counterparty – who knows if the bank you want to trade with might be hiding billions of losses?

    And so the increase in regulation has had precisely the opposite effect of what it was meant to achieve, making the markets more opaque and riskier for all of us. This is before even mentioning the costs that regulation imposes – costs that are all passed on to the end-user as higher fees.

    Simplicity and clarity is best

    Will anything change? Under the financial leadership of Brown and Darling in the UK, this seems highly unlikely. The government has its own history of off balance sheet shenanigans through PFI schemes, and its incessant tinkering with the tax system reveals an instinct for adding, rather than reducing complexity. This is before even mentioning the whole new system of EU-wide regulation under the ugly acronym of MiFID. We now have a jungle of rules from which it will be difficult to escape.

    Yet for the health of the financial markets, and the economy as a whole, it is vital that we start to move back towards simplicity and clarity. Would it not be better to teach investors the only real rule they need to know – “Caveat emptor” or “Buyer beware” – and let all the rest be done on trust? Financial scandals will continue to occur, as they have always done, but at least we will do away with the pretence that that the state and its agencies can somehow protect us from loss (or, more importantly, from the consequences of our own bad decisions).

    This may seem like wishful thinking, when the knee-jerk reaction to the ongoing credit crunch is likely to be more, rather than less regulation. But a return to a simpler system based upon basic but quite adequate legal protection, such as that against fraud and breach of contract, is surely preferable to the unstable and dangerous financial market structure that we now see.

    Paul Amery in “Money Week”, 1st March, 2008
    (Paul Amery is an independent financial analyst based in London, formerly a fund manager and bond trader.)

  • ”We're meant to have a government of all the talents, so, can Vince Cable please be co-opted as Chancellor of the Exchequer? He alone has consistently called it right and he has a better grip on economics and regulators than any of the lightweight team at the Treasury.

    It is an outrage that this Government can bail out the Labour heartland's Northern Rock, but still refuses to address the failure of regulators of Equitable Life, which has damaged the pension savings of far more than a million families.

    If the regulation of Equitable had been admitted and redressed, then the Financial Services Authority's cock-up on Northern Rock could never have happened. The EU Parliament's 47 recommendations contained in the EQUI report of last June remain unaddressed. No wonder no one trusts British regulators.

    Paul Braithwaite, General Secretary, EMAG.”

    Published in The Daily Telegraph 19th February, 2008

  • “Slip-up leaves Equitable pensioners on their backs again. If the latest misfortune to hit Equitable Life pensioners wasn't so tragic, it would be hysterically funny. Do you remember the old Charlie Chaplin gag where the clown keeps bumping into people and objects he hasn't seen? Or should that be Mr Bean? Whichever, he starts looking where he is going and spots a banana skin lying in his path. Smiling with relief that he's missed the trap, he jumps high into the air to avoid it, only to disappear down a pothole he hasn't spotted on the other side.

    Poor Equitable pensioners are just like this sad sap. For six years they have been buffeted and bruised in the financial equivalent of half a dozen rounds in the boxing ring.

    They have had to watch their pensions cut by up to half, which is no fun when you thought you had provided adequately for your wife and yourself in retirement.

    It's little wonder they rejoiced when the Prudential offered to take them under its wing.

    Everything looked brighter after the deal was done at the beginning of the year. They thought their problems were over. Until that is, their first pension payments began dropping on their doorsteps last week, when they found themselves disappearing down more dark tunnels.

    More than 2,000 very frail, elderly policyholders were shocked to see their pensions cut again by up to half. They knew there had to be a mistake, but couldn't get any sense out of anyone……..

    It became clear that some had indeed been issued with the wrong coding notices. Worse still, those affected were octogenarians or in their late 70s, many in poor health.

    They needed a shock like this as much as they needed a hole through the head. Cutting their pensions in half again left some of them without enough to live on……….Meanwhile, true to form, HMRC refuses to accept there is any problem and maintains that the new tax codes are correct. A spokeswoman said: "The position is quite unclear and we are continuing our investigations. We believe that the codes we issued to these customers were correct. The Prudential doesn't agree. We are continuing to investigate in an attempt to get to the bottom of the matter."

    What a pair, eh? Not so much Chaplin and Bean as Laurel and Hardy, and "Here's another fine mess you've gotten me into."

    Deaf to criticism:

    BACK to banana skins: Pensions Secretary James Purnell found himself sliding around on a veritable grove full when the Court of Appeal delivered its judgment on whether the Government had been justified in turning its back on the victims of company pension scheme collapses and rejecting the Parliamentary Ombudsman's report which found ministers culpable.

    To an extent this is all history, because the Government caved in to the victims' demands before Christmas, although we are told that it is not being quite so speedy at coming up with the cash.

    Just as well they did, because the Appeal Court agreed with Ombudsman Ann Abraham that the Government was guilty of administration.

    However, it is less clear that the Government lost the second part of the case, which related to its right to reject any Ombudsman's findings it doesn't like.

    All three sides are closely examining the judgment, and there may yet be an appeal to the House of Lords.

    But the point about the Government's right to reject the Ombudsman's findings is important, because we are expecting a highly critical report into the events which brought down Equitable Life before the summer is out.

    Given the Government's previous robust defence of its role as regulator to Equitable, we can expect that report to be rejected too.

    Which begs the question: why have an independent Ombudsman if the Government can simply bin any reports critical of its activities?”

    TERESA HUNTER, Scotland on Sunday, 10th Feb, 2008

  • “Government slammed yet again for injustice to pension victims
    Three Court of Appeal judges have today found the Government guilty of misleading 125,000 people about the safety of their pensions making it the sixth judgement against the Government in this matter.

    The Court of Appeal has confirmed the Judicial Review victory against the Government of 125,000 workers who lost their occupational pensions when their company schemes were wound up.

    The Secretary of State for Work and Pension's appeal against the High Court's ruling that "no reasonable Secretary of State could rationally disagree" with the Ombudsman was dismissed this morning.

    The three judges confirmed that the Secretary of State's rejection of the Parliamentary Ombudsman's findings was irrational and unlawful.

    It also rules that he must accept that his Department caused injustices which go beyond just financial losses.

    The verdict says the Government's maladministration also led to distress, anxiety, uncertainty and lost opportunities to make informed choices about their pensions.

    Secretary of state for work and pensions James Purnell intends to appeal against the decision in the House of Lords.

    Pensions campaigner Ros Altmann says:
    "We warmly welcome this judgment which, yet again, vindicates our arguments and confirms that the Government misled trusting citizens about the security of their pension savings. But we are astonished that the Secretary of State, James Purnell, wants to appeal to the House of Lords. It is now 6 - nil against the DWP. How many verdicts will it take to make the Government see sense?

    "This attitude merely reinforces the High Court and Court of Appeal verdicts that the Government's decisions in this matter are irrational. For the past few years, it has tried, unsuccessfully, to wear us down and even tried to bully the victims into submission, by threatening to bankrupt them if they lost the case."

    Nicola York, Money Marketing 7th February, 2008

  • Rebuke for ignoring Equitable Life report. Members of the European Parliament attacked the UK Government yesterday for its failure to respond to the 373-page report on Equitable Life published by the parliament's committee of inquiry last June, which calls for a compensation scheme for policyholders.

    "One would think the UK was not a member of the European Union," said the former chair of the committee, the Irish MEP Mairéad McGuiness, as she backed the view of the report's author Diana Wallis, the LibDem MEP, that the government had "failed in its duty of loyal cooperation".

    Robert Atkins, a Conservative MEP, described as an "utter disgrace" the Prime Minister's failure even to acknowledge a letter sent to him on the subject on December 6 by the European Parliament's president Hans-Gert Pöttering.

    Michael Cashman MEP, deputy chair of the parliament's petitions committee and a confidant of Gordon Brown, called on the UK to agree to implement the recommendations of the Parliamentary Ombudsman, which when finally published may urge a compensation scheme for investors.

    Cashman, speaking as the committee reconvened yesterday to try to put pressure on the UK Government, said: "I support fully the fact that we should have an early meeting and seek this concrete proposal and agreement that the Parliamentary Ombudsman's recommendations will be implemented. That seems to be the fair and just resolution."

    Paul Braithwaite, secretary of Equitable Members' Action Group, which raised the original petition in 2004, told the committee: "It is important to realise that the UK Government is in a legal dispute with the Parliamentary Ombudsman on a matter of great constitutional importance. In essence it has argued that the role of the PO is merely advisory to government ministers and that the findings cannot be binding'."

    He added: "Equitable sufferers are understandably embittered at the stark contrast between their quest for justice, which remains unaddressed after seven years, and the protection of Northern Rock's investors having been set up within seven days."

    Simon Bain in The Herald, January 25 2008

  • Europe loses patience over Equitable Life
    The European Parliament is to revisit its inquiry into Equitable Life next week in an attempt to force a response from the UK government on the EU's call for policyholder compensation.

    Equitable Members' Action Group (EMAG), which prompted the first EU inquiry of its kind in a decade in 2006, has been invited to address the parliament's petitions committee next Wednesday as the parliament seeks to assert its authority……

    It is seven months since the European Parliament overwhelmingly endorsed the report, which called on the UK government to accept responsibility for the insurer's near-collapse in 2000.

    Paul Braithwaite, secretary of EMAG, commented: "The Brussels parliament has waited patiently and then rather less patiently and is now being infuriated probably because of renewed concern about Northern Rock, which demonstrates that the British single regulator clearly doesn't work."

    MEPs voted last June by 602 to 13 to approve their report which called on the government to set up a compensation scheme for up to one million policyholders who lost money due to regulatory failure. Although most affected policyholders are in the UK, there were victims in 15 of the EU's 27 states, including 8000 policyholders in Ireland and 4000 in Germany.

    It emerged last week that on December 5 the President of the European Parliament, Hans-Gert Poettering, wrote to Gordon Brown to express his concern about the lack of a formal response to the report, a letter which has yet to receive a formal reply.

    Poettering says in his letter that the report "requires explicitly the government of the United Kingdom and the regulatory and supervisory bodies to ensure that the conclusion and recommendations of the inquiry are acted upon".

    He goes on: "I understand, however, that the European parliament has, as yet, received no response to this request and that your government has stated in the press that it will await the outcome of a separate national (parliamentary) ombudsman procedure before responding "Given the date by which the ombudsman is scheduled to report, the parliament finds itself faced with the prospect of having to wait more than a year between its resolution and any formal response from the government most concerned by it.

    "I would like to ask you to look into this issue and act in a way which will ensure that the authority of the parliament and of its right of inquiry enshrined in the EC Treaty do not risk being prejudiced by the lasting lack of a formal response by the British government." Diana Wallis, the LibDem MEP who led the writing of the report, commented last night: "We are trying to inject some urgency into getting a response from the British government.

    "We had a full response from the European Commission, we have had nothing from the government, not even an acknowledgment."

    The 373-page EU report said regulators had "behaved with undue awe or deference towards Equitable Life and apparently believed (it) to be too good and too reputable to make mistakes". This had exacerbated a "weak regulatory environment, which allowed the difficulties at Equitable Life to grow unchecked"…………

    Since the publication of the EU report after a 15-month inquiry, to which The Herald submitted evidence in Brussels, the government has said it cannot respond until parliamentary ombudsman Ann Abraham has produced her report on the saga.

    However, Abraham's report has been delayed by at least a year by the late arrival on her desk of a huge quantity of submissions by the Treasury and Financial Services Authority……..

    SIMON BAIN in The Herald, 17th January 2008

  • “EU pressure on Brown over Equitable row.
    Gordon Brown has been chided by the president of the European parliament over the British government's failure to respond to a highly critical report demanding compensation for Equitable Life policyholders.

    It emerged today that Hans-Gert Poettering wrote personally to the prime minister to express his concern about the lack of a formal response to the European parliament report, which received the backing of an overwhelming majority of MEPs in June last year.

    Campaigners said Brown risks a fresh row with his European counterparts because it is understood that Poettering is still awaiting a reply to his letter, even though it was sent on December 5 and concluded: "I look forward to hearing from you as soon as possible." The letter was passed to the Treasury, which intends to respond to it during the next few days. Equitable Life shut its doors to new customers in 2000 and later repeatedly slashed the value of a million policyholders' investments after it lost a legal battle involving guaranteed annuity rates, sold as part of pension plans. In 2006, the European parliament launched a formal investigation into the British government's role in what went wrong.

    A committee of inquiry produced a report which called on Britain to set up a compensation scheme for policyholders who lost money, and contained recommendations aimed at ensuring that such a scandal could never happen again. MEPs voted by 602 to 13 to approve the report. But campaigners have been frustrated by the government's refusal to issue a response, and Poettering wrote to the prime minister to say that the report "requires explicitly the government of the United Kingdom and the regulatory and supervisory bodies ... to ensure that the conclusion and recommendations of the inquiry are acted upon." He added: "I understand, however, that the European parliament has, as yet, received no response to this request and that your government has stated in the press that it will await the outcome of a separate national [parliamentary] ombudsman procedure before responding ...

    Given the date by which the ombudsman is scheduled to report, the parliament finds itself faced with the prospect of having to wait more than a year between its resolution and any formal response from the government most concerned by it. "I would like to ask you to look into this issue and act in a way which will ensure that the authority of the parliament and of its right of inquiry enshrined in the EC Treaty do not risk being prejudiced by the lasting lack of a formal response by the British government."

    UK MEP Diana Wallis said it was "immoral and illegal" for the government to leave so many Equitable policyholders without a remedy, while the Equitable Members Action Group claimed ministers had shown "flagrant contempt".

    The Treasury said it was unable to say very much until the completion of the parliamentary ombudsman's report into the debacle, due later this year.

    Rupert Jones in The Guardian 10th Jan, 2008

  • “Equitable accused of fund 'fire sale'
    EQUITABLE Life campaigners have condemned as a "fire sale" plans to sell the rump of the troubled fund, bringing more uncertainty and worry for 500,000 investors this Christmas.

    Paul Braithwaite, of the Equitable Members Action Group, said: "Plans to hive off Equitable's remaining policyholders are entirely predictable. This is a fire sale, designed to nail the coffin of this troubled company before the Parliamentary Ombudsman delivers her report next summer.

    "But investors should be careful what they wish for. If it goes into one of the zombie funds, they will treat these policies as milch cows and consumers may be no better off."

    Equitable members are used to bad news. What was considered the UK's finest insurance company closed in 2000, after a House of Lords ruling forced it to pay pension guarantees it could not afford.

    Members saw the value of their policies cut twice: first in 2001 by 16% and then again in 2002 by 10%.

    In addition, that year chief executive Charles Thomson switched the stricken fund out of equities and into lower-risk fixed interest gilts, which meant members missed out on the gains enjoyed elsewhere as share prices soared.

    The firm has shrunk from £26bn to £7bn as investors have fled. Canada Life bought the annuities book in February and the Prudential is due to take over the with-profits annuities policies on December 31.

    Chairman Vanni Treves plans to put the remainder of the business up for sale in the new year in an attempt to improve investment prospects for investors. He indicated he had already received tentative approaches…………

    Laith Khalaf, Hargreaves Lansdown's pensions analyst, argues that everything will depend on the financial strength of the acquirer…….

    "But if it goes into one of the consolidation or zombie companies, or any other company without a strong equity-asset mix, then it is unlikely that things will improve."

    A report into the failure of Equitable by Parliamentary Ombudsman Ann Abrahams is due before June after a number of delays.”

    Teresa Hunter, The Scotsman 23rd December, 2007