Tuesday, August 26, 2008

Equitable Life. - Government should pay out.

Over the past couple of weeks I have been contacted by local residents, following the publication of the Ombudsman’s report into the Equitable Life scandal.

Now this issue goes back to early 1999 after Equitable Life launched proceedings to cut bonus payments, effectively going back on promises made to policy holders. This affects many people in Warwick & Leamington, some of whom joined Pension Schemes from local employers.

The Ombudsman’s report into the Equitable Life scandal makes very disturbing reading. Its findings show that many Equitable Life policy holders lost money as a direct consequence of regulators failing to keep close enough scrutiny of the company.

The list of the regulatory failures includes:
  • The failure to adequately scrutinise Equitable Life’s returns and accounting policies and the value of its liabilities from 1990 onwards

  • The failure to act on the problems of the differential terminal bonus policy - and the over-bonusing of some investors at the expense of others

  • The failure to force Equitable Life to create a contingency fund to cover the risk of losing the Hyman case - which challenged Equitable Life policies and, if lost, would leave them open to massive liabilities

  • The decision to allow Equitable Life to keep trading after losing the Hyman case

It’s clear that many policy holders have been badly let down by regulators, have suffered financial loss as a result and deserve compensation for the losses caused by the failings of the regulator.

Lib-Dem shadow treasury spokesperson, Vince Cable has taken a very strong line on this:

  • After eight years and 13 reports it’s time for the Government to finally admit that it comprehensively failed to regulate Equitable Life properly.
  • For years ministers have acted like they were in a castle under siege, hoping that Equitable Life policy holders would give up and go away. Today’s report shows that, rightly, this is not going to happen.
  • Gordon Brown has overseen a complete and repeated failure of regulation spanning a decade. The outrage expressed by policyholders over this ’serial regulatory failure’ is entirely justified.
  • After months of dragging its feet, the Government needs to accept the Ombudsman’s recommendation that ‘wrongs should be remedied’.
  • If ministers choose to disregard this report, as they have done over tax credits and occupational pensions, it will be the final nail in the coffin for the Ombudsman’s credibility.
  • These are large sums of money, especially at a time when belts are being tightened. Gordon Brown must now admit fault and apologise to policyholders.
  • It is critical that the Government now sets out a credible, transparent and independent process to enter into a dialogue with policy holders over compensation.

Vince has also written an excellent article in the Telegraph.

Policy holders who have saved for their retirements, fully deserve fair compensation after this appalling maladministration over more than 10 years.

Links to useful sites.

BBC Website

Equitable Members Action Group

2 comments:

Alan Beddow - Lib-Dem PPC Warwick & Leamington said...

Note:- Many people affected in Warwick & Leamington joined a pension scheme from local employer IBM.

IBM are my employer and so I would like to make it clear that.

a/ My comments on this blog are nothing to do with my employment with IBM.

b/ I was or have never been a member of one of the affected pension schemes.

Serpentine Belts said...

After being contacted by several local residents, I’ve been reading the 50 page summary of the Ombudsman’s report into the Equitable Life scandal - and the summary of the EU report (for which, incidentally, the investigation was led by a Lib Dem MEP - Diana Wallis) and they both make very disturbing reading.

They make an unanswerable case that many Equitable Life policy holders lost money as a direct consequence of regulators failing to keep close enough scrutiny of the company and act on the the risks and problems that they either had, or should have, identified.

The list of the regulatory failures includes:

* Allowing the combination of the roles of Chief Executive and Appointed Actuary between 1991 and 1997
* The failure to adequately scrutinise Equitable Life’s returns and accounting policies and the value of its liabilities from 1990 onwards
* The failure to act on the problems of the differential terminal bonus policy - and the overbonusing of some investors at the expense of others
* The failure to force Equitable Life to create a contingency fund to cover the risk of losing the Hyman case - which challenged Equitable Life policies and, if lost, would leave them open to massive liabilities
* The decision to allow Equitable Life to keep trading after losing the Hyman case

It’s clear that many policy holders have been badly let down by regulators, have suffered financial loss as a result and deserve compensation for the losses caused by the failings of the regulator.