Equitable Life policyholders win compensation

[Legal Beagles]

Policyholders with Equitable Life could be entitled to compensation under a scheme announced by the government today, but it could take at least two years for payments to be made.

In a statement to MPs the Treasury minister, Yvette Cooper, apologised to more than 1 million policyholders on behalf of regulators and successive governments for the "maladministration" that had resulted in the insurer's near collapse in 2000.

Cooper said the government would set up a fair payment scheme for policyholders which would focus on helping investors who had been "disproportionately affected" by the events at the mutual insurer, which was brought to its knees after a court ruled it had to honour guarantees made to pensions customers.

"It is clear that people have been affected, and have experienced significant distress due to events at Equitable Life," she said.


"I wish to apologise to policy holders on behalf of the public bodies and successive governments responsible for the regulation of Equitable Life between 1990 and 2001, for the maladministration we believe has taken place."

Today's statement came in response to a scathing report into the debacle last summer by the parliamentary ombudsman, Ann Abraham, who found that regulators responsible for monitoring insurance companies, including the Treasury and Financial Services Authority, had made significant mistakes.
While Cooper accepted some of the criticisms, she rejected the ombudsman's recommendation that the government offer compensation to all Equitable members, saying the taxpayer could not be responsible for bailing out all investors with poorly regulated firms.

"It would have serious repercussions for the taxpayer, for the relationship between governments and financial markets, and for the nature of regulation, were the taxpayer to provide a remedy for all losses every time the regulator fails to prevent a financial institution getting into trouble," she said.

Maladministration


Instead, the government has asked appeal court judge Sir John Chadwick to study Equitable's books to work out which policyholders have been hardest hit.

He has been asked to examine the relative losses suffered by each policyholder, and to determine what proportion of those losses can be attributed to the maladministration accepted by the government and what is a result of the actions of Equitable Life.

Cooper told MPs that compensation would be based on the extent of a policyholder's losses and their ability to make up those losses from other income, and suggested that those who had already retired would be more likely to receive payouts than those still in work.

"There is a difference between someone who relies on their Equitable Life policy for their entire income and someone who has alternative incomes," she told MPs.

The decision to limit payments was criticised by the shadow treasury minister, Mark Hoban, who said it was "means-testing a compensation rather than compensating people for injustice".

Ann Berry, a policyholder who has been forced to move to a cheaper property after the payouts on her £110,000 pension pot were cut, said she was outraged by the announcement.

"There is no sum of money mentioned, let alone cash on the table. Cooper bleats on about a hardship fund but it should not be a question of means-testing whatever they describe as hardship. All policyholders lost out as result of maladminstration."


There was also concern over the time that could pass before payments are made. Cooper said Sir John had been asked to offer guidance "as quickly as he is able" and to offer updates on his findings so the government could start work on setting up the scheme before his final report was finished.


However, the government has only committed to making payments within two years of the scheme being set up, which mean policyholders face more delays before they learn if they are entitled to compensation.

Too late for some


The Equitable Members Action Group estimates around 32,000 policyholders have already died since its campaign for compensation began, and that members continue to die at a rate of around 100 a week. By the time a scheme starts paying out at least 13,000 more members could die.

The Liberal Democrats' shadow chancellor, Vince Cable, criticised the government for making "prudent, careful" investors wait so long for a decision.

"This fiasco has shown the government at its most shabby and disreputable. Many policyholders have died while ministers have dragged their feet," he said.

"The Treasury has been desperate to avoid paying compensation, but its position has now been blown apart by the financial crisis. After bailing out both Icelandic and nationalised bank depositors, Equitable Life investors will not be able to understand why they are being treated less favourably."

• Equitable Life
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• Pensions
• Economic policy

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Re: Equitable Life policyholders win compensation

http://news.bbc.co.uk/1/hi/business/10111378.stm

Equitable Life: New compensation plan announced


Page last updated at 15:28 GMT, Wednesday, 12 May 2010 16:28 UK

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The battle for Equitable Life policyholders has been long-running An enhanced compensation scheme for over one million Equitable Life members has been announced by the two parties forming the UK's coalition government.
The savers lost money after the pension company's near-collapse in 2000.
The coalition agreement says they will be compensated for their "relative loss", as recommended by the Parliamentary Ombudsman.
This goes much further than the limited scheme being devised at the request of the former Labour government.
After the Equitable closed to new business in 2000 more than a million policyholders suffered large cuts to the value of either their prospective or current pensions as the society struggled to stay solvent.
Paul Weir, spokesman for the Equitable Members Action Group, welcomed the new government's commitment.
"After 10 years of denial and obstruction by the previous administration it's been a long time coming," he said.
"Sadly many thousands of Equitable pensioners have died without justice, sacrificed on the altar of Gordon Brown's defence of 'lite touch' regulation."
Agreement In a 12-page document, the Tories and Lib Dems have outlined the key issues on which they agree as part of a coalition government.
EQUITABLE TIMELINE


Continue reading the main story

• January 1999: Equitable tries to abandon making guaranteed payments it can no longer afford
• July 2000: The House of Lords says Equitable must honour its original commitments, forcing the company to put itself up for sale
• December 2000: Equitable Life closes to new business after failing to find a buyer
• March 2004: Lord Penrose's report says the society was the "author of its own misfortune"
• July 2008: The Parliamentary Ombudsman says regulators failed to protect policyholders and calls for a compensation fund

What happened to the Equitable?
Within it is a single paragraph that will be welcomed by campaigners who have called for fuller compensation for Equitable Life members.
"We agree to implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure," it reads.
Alistair Dunbar, of the Equitable, said: "This does look very positive.
"We look forward to working with the new government to help them to deliver a payment scheme that is swift, simple, transparent, fair and seen-to-be fair. Our policyholders have been waiting long enough."
'Regulatory failure' In July 2008 the Parliamentary Ombudsman, Ann Abraham, published a report which pinpointed "a decade of regulatory failure" as being one of the main reasons for the collapse of the pension company.
She called on the government to set up a scheme to compensate the savers for the maladministration and their losses.
"The aim of such a scheme should be to put those people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred," she said at the time.
However, the Labour government proposed a less wide-ranging scheme.
Last October, the High Court approved the government's plan for only limited payments to those who had lost money "disproportionately".
A former High Court judge, Sir John Chadwick, has been trying to design a payment scheme to meet the government's aims, and his work has been ongoing until now.
"I welcome the commitment the new government has made in its coalition agreement today to implement the recommendations I put forward for the compensation of Equitable Life policy holders," said Ms Abraham.

Other issues Among the other key personal finance issues outlined in the coalition document are:

• Reductions to the Child Trust Fund and tax credits for higher earners
• An independent commission being set up to review the long term affordability of public sector pensions, while protecting accrued rights
• Restoration of the earnings link for the basic state pension from April 2011 with a "triple guarantee" that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats
• An increase in the personal allowance for Income Tax from April 2011
• The phasing out of the default retirement age
• A review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
• An end to the rules requiring compulsory annuitisation of personal pension savings at 75.

Conservative Prime Minister David Cameron described the agreement as marking a "remarkable and welcome day".
Deputy Prime Minister, and Liberal Democrat leader, Nick Clegg admitted there would be some "bumps and scrapes" over the course of the arrangement but insisted the parties had a "common purpose".