20/08/2008 - Don’t accept platitudes from MPs
Many EMAG members are feeding back to us copies our their MP’s responses - and pretty pathetic they are. Most are “cookie cutters”, reproducing the party line. Labour ones say “It’s complicated” and we’ll have to wait (more waiting!) until the autumn. The Tories make a welcome commitment to paying up but go on to make inaccurate implications about what Ann Abraham has written, which may be the precursor to Tories short-changing the victims if we let them. EMAG is urging policyholders to engage with their MPs by writing back and saying the generalised answer isn’t good enough: that you’re seeking a personal commitment from the MP to support their own Ombudsman and that this is a vote-influencing issue.
20/08/2008 - Letters to Equitable members
EMAG welcomes the letter being sent out by the Equitable’s board to members, with the same message as that posted – with much greater detailed content - by EMAG to 200,000 policyholders two weeks earlier, read the letter from Equitable's Board here (pdf).
See Vanni Treves letter.
22/07/2008 - EMAG’s submission to PO 2 (including redress)
EMAG was the primary supplier of evidence to the PO’s Report. The EMAG board’s confidential reading committee received the draft report on 23rd February. In the 10 following weeks, EMAG digested the draft and commissioned expert professional opinions from a QC, a leading actuary (Steve Dixon) and commissioned our accountantants, Burgess Hodgson, to make a formal EMAG response. Several of the suggestions were adopted.
The EMAG section of redress, quantification and how compensation should be administered is reproduced in full in the PO’s final report and is its only reference to the prospective scale of compensation.
If you read only one document, EMAG suggests it be this one.
Read EMAG's press release.
22/07/2008 - Parliamentary Ombudsman’s report: “Equitable Life, a decade of regulatory failure”
PO press release at: http://www.ombudsman.org.uk/news/press_releases/pr2008_07el.html
The PO's summary 48 pages to download.
Click here to download PDFs of whole report.
22/07/2008 - The fantastic press coverage
The coverage by the quality papers has been exceptional:
See The Daily Telegraph's
The Financial Times coverage was exceptional.
But many other excellent and supportive articles in every serious newspaper
Some correct anticipation in advance of publication. See some of the headlines.
However, the backlash on nay-sayers against the public purse per The Treasury’s spin is already present.
22/07/2008 - Equitable Life WAS unique
An oft repeated put-down used against the Equitable sufferers has been that ALL lifcos were over-bonusing and were over-exposed in equities, leading to big decreases in policy values after 2002 (a period outwith the remit of the PO’s report).
However, the others had shareholders or huge multi-billion pound orphan estates to fall back on and none had Equitable’s concentration on pensions or huge known-by-the-regulators exposure to GARs. Finally, unlike Equitable, none ran a negative “smoothing kitty” throughout the 1990s.
IF they were all the same, where then are the thousands of complaints against those other companies? Only Equitable has been subject to no less that THIRTEEN REPORTS since 2001. But this new thorough one from the PO is the very first to have Parliament’s authority to address blame and recommended compensation. See the list of Equitable Life Reports.
27/06/2008 - EMAG goes regional!
EMAG is setting up a network of regional action groups in anticipation that the Parliamentary Ombudsman may recommend compensation when her report is finally published in mid-July.
Click below to visit the new website and see how to join the campaign in your area. Even if you are already an EMAG member, logging your details on your regional site will enable you to keep in touch with action in your area or perhaps to join the regional team to help promote the campaign.
www.emagregional.org.uk
Read more.
See EMAG’s press release announcement of regional groups.
02/06/2008 - The FSA and its AGM
On 29th May Lord Adair Turner was confirmed to be the new chairman of the FSA from September, replace Sir Callum McCarthy after five dismal years under his stewardship. The apppointment is welcomed by EMAG.
Read about Adair Turner’s task in this in-depth article in the Sunday Telegraph, by Katerine Griffiths.
Sir Callum will have the unenviable task of chairing the eigth annual public meeting of the FSA at the Q E 2 Conference Centre in Westminster on the morning of Thursday 24th July. Do try to attend. Find out how to register here.
Hopefully, Callum McCarthy will be held to account for the Northern Wreck AND the Equitable, post the publication of PO 2 one week earlier.
02/06/2008 - PO date confirmed
All MPs returned on 2nd June from their break to a letter from Ann Abraham, in which she confirms her report will be laid before the Houses of Parliament in the week commencing 14th July – just a few days before MPs long summer recess which starts on 22nd July. Read her letter.
28/05/2008 - Vanni and Lizzie
The Guardian printed an extensive hagiography on the Society’s chairman, Vanni Treves, on 9th May. Read about his charitable works.
It was heartening to observe that tireless campaigner for Equitable, Liz Kwantes, was honoured with an MBE by the Prince of Wales on May 16th at Buckingham Palace. See http://www.equitablelifemembers.org.uk/
28/05/2008 - Equitable for sale, blah blah
Predictably, a few days before the ELAS AGM, a raft of newspapers published the oft-repeated leaked story that maybe, just maybe, the Pru might buy the remaining £6.6bn WP fund. We have heard all about the prospective sale, the data room of info and the excitement of interest ad nauseum. The likelihood is that no bidder will proceed until PO 2 is in the public domain for fear of a possible new wave of litigation. So it’s unlikely that the Society will be sold in 2008.
28/05/2008 - Equitable’s AGM, 19th May
Held with all the usual razmataz in Westminster, with big screen, staging, autocue and computer logging of questions with roving mikes and a cast of probably two dozen, with the senior litigation partner at solicitors Lovells, Neil Fagan, present - why? And for what? Why are there eight non-execs? What do they do? The total number of member attendees was 70 – less than EMAG has ever had to any of our seven AGMs, without any of the gubbins. Equitable’s should have been in a village hall in Birmingham.
There are about 400,000 people with an ongoing interest in the £6.8bn with-profits fund. Of the 180,000 remaining voting members, approximately 16,000 bothered to vote. About 12% of these voted against the board’s remuneration package. Read the text of the chairman and managing director’s speeches at the AGM.
The Mail on Sunday’s financial editor certainly has a long knife out for MD Charles Thomson’s £1m remuneration. See his articles on May 11th.
And, after the event, pointing out the substantial votes against the board’s remuneration motion.
28/05/2008 - TreasCom grilled the FSA, 6th May
EMAG’s Paul Braithwaite attended the two hour session and observed that Hector Sants acquitted himself well. The most incisive MP was judged to be Labour’s Andy Love who asked such valid questions as:
Q 108: “Mr Sants, is the FSA independent enough from its contributing member firms to be able to deal with this problem adequately?”
Q 118: “One final question if I can, Chairman. Mr Sants, you said earlier on, and I agree very strongly with it, that your role is to look after the consumer. Is it the success of the SEC in the United States that there is a perception there that the authorities look after the little guy against what is happening in some of our city institutions, and should not the FSA be concentrating more on looking after the little guy in order that we achieve more success in this area?”
Find out the answers at the transcipt (towards the end).
03/04/2008 - ELAS 2007 figures
On 27th March, Equitable Life published its preliminary 2007 financial report. It was much the same story as before. A nominal amount invested equities. The with-profits fund in now down to £6.6bn (run down from £26bn in 2000). The bonus, non-guaranteed, remains the same at 5%.
Perhaps the most interesting para was this one:
“During 2008 we have been notified of 78 legal claims lodged in various regional courts in Germany. We will examine these claims in due course and consider them on their individual merits. As usual, we will resist any attempts by policyholders to obtain an unfair advantage at the expense of all other with-profits policyholders.“
The news was that there was no news. Trailed many times and oft that the remainder would be sold off (and that there’s a queue of bidders) has evaporated into the ether. It’s STILL all for sale. Did not Vanni and Charles promise in November 2006, when they were covered in opprobrium over their disastrous £50m waste on failed litigation, that there was no point in demanding that they go because they’d be gone by the end of 2007? See more deja-vu reporting of the recycled story.
03/04/2008 - The FSA report on itself
Surprisingly, the internal report by the FSA into supervision of the Northern Wreck, published on 26th March, was particularly self-critical. Download the 12-page executive summary and press release.
These were the four key failings identified in the supervision of the FSA:
- A lack of sufficient supervisory engagement with the firm, in particular the failure of the supervisory team to follow up rigorously with the management of the firm on the business model vulnerability arising from changing market conditions.
- A lack of adequate oversight and review by FSA line management of the quality, intensity and rigour of the firm's supervision.
- Inadequate specific resource directly supervising the firm.
- A lack of intensity by the FSA in ensuring that all available risk information was properly utilised to inform its supervisory actions.
It must be enormously helpful to EMAG’s cause of claimed maladministration by the FSA to be able to demonstrate that, six years after the Equitable’s problems became public, the FSA continued to fail investors in such chronic fashion. The FSA simply won’t be able to say that “lessons had been learned”. Hopefully, PO 2 will highlight the parallels between Equitable Life regulation and Northern Rock. See just some of the press coverage.
25/02/2008 - In the House of Lords
From Hansard 18th Feb 2008, Column 26, 3:56pm
Tory Lord de Mauley:
“My Lords, I thank the Minister for repeating this Statement on Northern Rock. I wish that I could say that I welcomed it, but I do not. I am sorry for the Minister for having to read it, as, indeed, I am sorry for the Chancellor, who is out of his depth and a puppet for a failed Prime Minister—a Prime Minister who created the conditions for the failure of Northern Rock in the first place.
Can the Minister confirm that the Bill gives the Government power to alter any Act of Parliament applying to banks in the United Kingdom by order? Can he confirm that it gives the power to backdate regulations applying to banks and building societies?
Why has the Treasury flung so much money at this company when with, say, Equitable Life, it slunk past on the other side of the road? What is the difference between one financial institution with an over-ambitious business plan and another?”
Read more.
25/02/2008 - Nice stuff about Dr Cable
Vince Cable has been the stand-out politician who has had a clear grasp of Northern Rock all along. Incredibly, the chairman of the FSA, Callum McCarthy tried to shut him up in September and accused him of scaremongering.
Cable has been the subject of extensive press praise, in particular in the Guardian, with as very amusing Parthian Shot: “The government does seem to have an extraordinary search engine, which finds banana skins to fall on."
25/02/2008 - Northern Wrecked: official
The shock news came on Sunday afternoon 17th Feb:
Explaining the government's decision, Mr Darling said: "It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain."
http://news.bbc.co.uk/1/hi/business/7249575.stm
There was a superb, hard-hitting TV documentary on C 4 “Despatches” on Monday18th February, presented by Jon Moulton, which took Gordon Brown to task for his dithering.
16/02/2008 - The Hunt Review of the FOS
In September of 2007, the Government asked a safe pair of hands, Lord Hunt of Wirral, to review the performance of the Financial Ombudsman Service (FOS). The focus is on:
“How to ensure that the FOS is as open, approachable and user-friendly as it can reasonably be expected to be”. Predictable submissions from all the financial service industry’s usual suspects can be found at: http://www.thehuntreview.org.uk/submissions/submissions.html
But do read EMAG’s succinct one prepared by Chris Carnaghan, referring Lord Hunt to the excellent and blistering critical report by Lord Neill and raising the issue of why the FOS is exempt from the FOI. Don’t hold your breath hoping that the FOS will be transformed!
Interesting, isn’t it that despite being handed a comprehensive dossier on the Lord Neill Report, Sir Christopher Kelly, the ex-chairman of the FOS has never commented on Lord Neill’s work and, ironically, has now been given Lord Neill’s old job - Chairman of the Committee on Standards in Public Life. Appointed by one Gordon Brown! It’s a small world.
16/02/2008 - Petition to Number 10
More than 500 people signed an e-petition to Number 10 Downing Street, written by Melvyn Gill. It read:
“This government has evaded its responsibility towards 1.25 million citizens of this country by rejecting both the findings of the Penrose report and the findings of the Parliamentary Ombudsman, showing a contempt of the P.O. office to the detriment of our Parliamentary institutions, and our right as citizens to justice against a Government that has set it face against any form of compensation for people who have paid into a pension all their lives, only to find that Governments of both parties have failed to properly regulate Equitable Life.”
EMAG was pleased to note that one Charles Thomson was a signatory, along with dozens of well known Equitable Life activists. See the other 536 names at: http://petitions.pm.gov.uk/Equitable-Life/?showall=1
The Government’s response was utterly predictable i.e. “Can’t say anything because of the PO”.
“The Parliamentary Ombudsman is currently carrying out an investigation into the prudential regulation of Equitable Life. The timetable for the completion of this investigation is a matter for her. It would not be appropriate for the Government to comment on matters related to Equitable Life until the Ombudsman's investigation is complete and her report has been published.”
It’s the favourite Government’ “get out of jail free card”, with an apparent shelf life measured in years!
09/02/2008 - Prudential WP annuitants tax shock
It was reported by Teresa Hunter that 2,000 of the 56,000 with-profits annuitants that are now administered by the Pru had an unpleasant shock with their first payment in 2008. Where they had several policies in payment the Inland Revenue has, in many cases, put all payments on an emergency tax code, resulting in some individuals suffering up to 50% reduction in their monthly pension receipts. The individuals need to contact their own tax offices to seek immediate rectification. Many ex-Equitable WPAs seem to be unaware that unless the Pru is able to declare annual bonuses in excess of 11%, their annuities can continue to be cut. Read the Telegraph article.
09/02/2008 - Damning TreasCom report on FSA
Finally, the FSA has been lambasted for incompetence in the Northern Rock. Here’s what Christine Seib in the Times wrote: “MPs demand new regulator as FSA stands condemned. A cross-party committee of MPs yesterday called for a new office to monitor British banks, saying that the Financial Services Authority should not be permitted any additional powers.
The Commons Treasury Select Committee’s report on the Northern Rock scandal said that the City regulator has “systematically failed in its duty” to oversee the troubled bank’s activities. “The FSA did not supervise Northern Rock properly,” the report said. “The failure of Northern Rock, while a failure of its own board, was also a failure of its regulator.”
The 183-page report will sour the exit of Sir Callum McCarthy, who is due to step down as chairman of the FSA in September. It recommends that a Bank of England deputy governor and head of financial stability be introduced to oversee a new protection scheme for bank deposits, keep a look out for banking problems and oversee the rescue or “orderly failure” of troubled banks.
To encourage “creative tension” in the system of financial regulation, the FSA should not be given responsibility for these new powers, the MPs said...
Read the whole damning report here.
09/02/2008 - The Court of Appeal ruling, finally
Although all the press has reported that the Government lost again in its attempts to avoid culpability for the Occupational Pensioners, the complex ruling of Sir John Chadwick, is far from good news for the office of the PO or democracy. The ruling states unequivocally that the PO’s findings are NOT intended to be binding and that ministers must have the right to come to Parliament and contest those findings, but they must bring cogent reasons.
Paragraph 91 reads: I am not persuaded that the Secretary of State was entitled to reject the Ombudsman’s finding merely because he preferred another view which could not be characterised as irrational.
As I have said, earlier in this judgment, it is not enough that the Secretary of State has reached his own view on rational grounds: it is necessary that his decision to reject the Ombudsman’s findings in favour of his own view is, itself, not irrational having regard to the legislative intention which underlies 1967 Act: he must have a reason (other than simply a preference for his own view) for rejecting a finding which the Ombudsman has made after an investigation under the powers conferred by the Act.”
The DWP had failed, even in the two subsequent Court hearings, to provide any reasonable rebuttal, which is why they lost on the PO’s first finding in this case.
Notwithstanding, the Court of Appeal has tipped the balance of power firmly towards the Government at the cost of the authority of the PO. A department of state found guilty of maladministration in a PO report is apparently under NO obligation to judicially review it where it contests the findings. This is a disaster. This makes a mockery of the no-cost Alternative Dispute Resolution (ADR) service that the PO is meant to provide, since to prevail against a reluctant Government will require a hugely expensive formal Judicial Review, with all the risks entailed.
It seems totally out of tune with contemporary well-warranted cynicism of politicians to enhance their omnipotence, rendering them arbiter in their own department’s confirmed maladministration against the finding of an independent evaluation. And how inappropriate is it to subject the PO’s reports, whose task it is to decide with Natural Justice whether maladministration has taken place, to the judiciary and its very different hurdles and formal framework? No doubt Dr Tony Wright’s committee on Public Administration will need to visit this ruling in detail. The consequence of this ruling may well be a further delay to the timing of PO 2.
Read the full 60 page ruling.
25/01/2008 - The Lord Hunt Review of the FOS
The FOS is the subject on a so-called “independent” review. It will be focused on “how to ensure that the FOS is as open, approachable and user-friendly as it can reasonably be expected to be; and also that it sets reasonable expectations of what it can do and what it can't do.”
EMAG has reminded Lord Hunt of the excellent Lord Neill devastatingly damning report of Lord Neill, one year ago.
See the Review’s website at: http://www.thehuntreview.org.uk/
11/01/2008 - A Tory MP speaks out
It was very pleasing to See a Tory MP Bob Spink raise the comparison in the Pensions Bill debate on 8th January thus:
“Pensioners see £25 billion thrown at the Northern Rock problem and wonder at the absence of the financial constraints that the Government always claim to be under when pensioners need help. What about the Government's failure on the Equitable Life debacle and their breach of trust on police pay? I put it to the House that this is no time for politicians to say, "Trust me, I'm a fairly straight sort of guy", as Mr. Blair once infamously did.”
Read More
11/01/2008 - Northern Rock and the FSA
The estimate of the public’s exposure to Northern Rock is now of the order of £40 bn, rising daily. The Treasury is rumoured to be seeking middle-eastern underwriting. Incredibly, the Chancellor proposes to reward the demonstrably incompetent FSA with much enhanced powers. You couldn’t make it up. The Treasury Select Committee has had two interesting evidence sessions with the FSA. 9th Oct, 2007: and 11th Dec, 2007
It is anticipated that TreasCom will report its views on the debacle in February. Will its chairman, John McFall, finally change habits of a lifetime and criticise Mr Bean’s regulatory regime?
11/01/2008 - ELTA's litigation resolved
On 10th January it was announced that the class action by 407 with-profits annuitants, coordinated by Bristol solicitors Clarke Willmott, had been settled just a couple of weeks before being due back in Court. They claimed, post-Penrose, that their annuities had been mis-sold to them.
The ELTA group defied the Society’s threats to see them off in Court and pursue them individually for multi-million pounds of legal costs if they dared proceed. ELTAs litigants are now believed to be going to receive very material compensation. The other 56,000 with-profits annuitants will receive nothing. But at least the fat-cat lawyers’ gravy train has been stopped.
This resolution echoes the situation of 12,000 Equitable late-joiners who, prior to the CONpromise were assured there was simply no point in leaving to preserve legal rights, because there was no valid claim for mis-selling, hence no reserves for any compensation. But 200 members of ELJAG, the late joiners group, are believed to have received back the equivalent of all their invested capital, recouping far far more compensation than the derisory sums subsequently recommended by the Society’s hired-gun barristers, Moss and Carr for the rest.
As Ian Hislop famously once said: “If that’s justice, I’m a banana.”
Given that a fundamental tennet of the FSA is to ensure fair treatment for all, one wonders how the 56,000 with-profits annuitants (now with the PRU) feel about Vanni Treves having settled ELTAs claim in secret for substantial compensation.
Read the press reports of the settlement.
Of course, this now clears the decks for the final sell-off of the remaining unfettered £7bn with-profits fund and the demise of the world’s oldest mutual life assurance company.
08/01/2008 - Comparrison with Northern Rock
The Motley Fool poster “matt404” (who is a retired actuary) wrote a prescient post (number 68444), drawing the analogies between the Northern Rock debacle and Equitable:
- both organisations were controlled by an autocratic chief executive
- both had a wonderful new (but, alas, flawed) business plan that took them to the top of their sector
- both claimed a moral superiority over their competitors: one gave no commission to greedy intermediaries, the other ran an internal charitable foundation
- when each hit the buffers, there were cries of: “ We are solvent! Don’t panic!”
- in order to create the impression that all was well, a dividend/bonus was then proposed to be paid out of money that did not exist (the fact that the NR dividend was withdrawn was a difference)
- both were then put up for sale
- several suitors came forward. Shareholders/policyholders both demanded the right to choose which of the offers should be accepted.
- a hedge fund investor/Stuart Bayliss then emerged who threatened to veto any proposal they did not like
- the FSA/Gordon Brown, in reply to Vincent Cable at PMQ on Dec 5th, said all would be well because the business is up for sale and was almost certain to be sold (with FSA this was explicit, with GB it was implicit)
- one by one, the suitors withdrew from the negotiating table, which is where we are now.
So, on the basis of the ELAS experience, we can all comfortably assume that
- all the bidders will have withdrawn before December is out
- taxpayers will have to pick up the tabs that correspond to those WP policy holders were saddled with
………..but it all means that LESSONS WOULD BE LEARNED!
http://boards.fool.co.uk/Message.asp?mid=10827874
08/01/2008 - A puff for Vanni Treves A puff for Vanni Treves
The Equitable saga has gone on so long that there is always a new gullible journalist for Vanni Treves to charm. See this piece of puffery in the Daily Telegraph by newcomer Yvette Essen. It contains such gems as:
“Having received death threats and had his house windows smashed three times, Vanni Treves is used to having people protecting him.
Thankfully, the three "policemen" surrounding the non-executive chairman of Equitable Life this time are of a different sort. And his trio of PRs have good reason to fuss - this is the 67-year-old's first profile interview in years….”
“Mr Treves can barely contain his excitement when he talks about how various advisers are preparing a dataroom of information…..“
"Mr Treves is tight-lipped about whether it would be his swansong should he succeed in selling Equitable. “If there is a deal to be done, I will personally give an enormous party," he promises. "I expect all of us to leave very drunk, and I insist - if I am still here - on putting out the lights."
08/01/2008 - Annuitants transferred to PRUAnnuitants transferred to PRU
On 1st January 56,000 with-profits annuitants left Equitable and are now under the wing of the Prudential. In consequence, having totally missed out on the doubling in the FTSE-100 in the last four years by being just 5% invested in equities, their £1.7bn will now be 75% invested in equities (and property). This may, however, not be a good time for such a switch. For annuities to not be cut further, the PRU needs to declare annual bonuses in excess of 11% pa – a tough target. See Guardian article.
