Quotes

• "Equitable Life redress ruling ‘unfair’

  The Government's decision not to compensate Equitable Life members who annuitised before 1992 was unfair and wrong, according to and Pensions select committee member Andrew Bingham.

  In June, the Government began distributing £1.5bn of compensation to those who annuitised after 1992. It chose the cut-off date because before then there was no maladministration in the firm which, if spotted by the regulator, could have affected policyholders' investment decisions.

  But speaking to Money Marketing at the Conservative Party conference last week, High Peak MP Bingham said the 10,000 people who annuitised before the cut-off date should have been included.

  He said: ‘When the vote came through the House of Commons I voted against the Government because I thought the pre–1992 annuitants should have been entitled to compensation. There were a few of us who thought the same, but not enough.

  ‘Even though their losses were not the result of regulatory failure, I think it was unfair and wrong to exclude them. A lot of Equitable Life policyholders feel the Government's solution is not as they would wish.’

  Under the compensation scheme, £620m will go to 37,000 with–profits investors compensating them for relative losses. Two-thirds of the money is expected to be paid out by 2015."

  Money Marketing, by Steve Tolley 13 Oct 2011

• " ‘Unfair’ Equitable compensation scheme under pressure.

  The Government is under renewed pressure to review its controversial decision to exclude more than 10,000 Equitable Life customers from a £1.5 billion compensation scheme it launched earlier this year.

  It follows publication of an independent report by an eminent actuary for pressure group Equitable Members Action Group (EMAG) that says their exclusion is both unfair and unjustified.

  The report, written by David Forfar, a fellow of the Faculty of Actuaries and former appointed actuary for Scottish Widows, looks into the treatment of Equitable Life customers who hold with-profits annuities with the mutual.

   

  When the Government drew up details of the compensation scheme, it decided to divide the 47,000 annuitants into two camps.

  The 37,000 who took out their policies from September 1992 onwards were promised full compensation to cover their losses resulting from the failure of regulators and past governments to monitor effectively the mutual.

  Not being able by law to transfer their annuities, these customers, says the Government, suffered savage cuts in their income after Equitable took action to avoid bankruptcy.

  But earlier annuitants were offered no compensation as they had already benefited from unusually high income payments as a result of the mutual's willingness to pay large bonuses to attract new business. These overpayments, the Government argued, more than made up for subsequent losses.

  Forfar concludes that it is ‘unfair’ to compensate just one group of annuitants and says the over-bonuses were ‘insignificant’.

  On Friday, EMAG's Paul Weir said the Government should offer compensation to the 10,000 annuitants — many in their 80s — before ‘it is too late’...
  The Treasury declined to comment."

  Mail on Sunday, by Jeff Prestridge 25 September, '11

• "Fury as only 321 Equitable policyholders are paid

  More of its oldest policyholders could die before they received payments, the Equitable Members' Action Group said Equitable Life campaigners renewed their attack on the Government's compensation scheme yesterday as it emerged that only a fraction of eligible policyholders had received payments.

  The Treasury has pledged to pay out £1.5 billion in compensation to about one million Equitable policyholders, who saw the value of their savings fall by as much as 60 per cent when the mutual almost collapsed more than a decade ago. After a concerted campaign by action groups, the Treasury has agreed to pay out £500 million of this by next April and to contact all eligible customers by June. The average payout for policyholders is expected to be between £800 and £1,000.

  But it has emerged after a freedom of information request that, as at the start of this month, only 321 payments had been made from the scheme.

  The Equitable Members' Action Group, which has been fighting for more than a decade for policyholder recompense, said it feared that the Treasury was stalling. More of Equitable's oldest policyholders could die before they received payments, EMAG said. The group has dismissed the size of the payouts — worth slightly more than a fifth of customers' losses — as derisory.

  Paul Weir, the EMAG spokesman, said: ‘They're going to have to ramp things up spectacularly to turn an annual rate of 3,700 into one million.’;

  Paul Braithwaite, the general secretary of EMAG, said that the group, which has more than 40,000 members, had been contacted by many anxious policyholders wondering why they had heard nothing.

  ‘EMAG is having to be the frontline service because the Treasury has created a vacuum by not communicating anything to the million policyholders acknowledged as being eligible for compensation,’ he said.

  A spokesman for the Treasury said that it was deliberately starting slowly to ensure that its complex payment mechanism worked properly and that payments would speed up soon."

  The Times, by Miles Costello 18 August, 2011

• "Equitable saga ends, but the shame lives on.

  After more than a decade of demonstrating outside Parliament, lobbying MPs, pressing Governments (past and present) and taking their case to Europe, some Equitable Life policyholders actually began to receive compensation last week.

  This follows a commitment by the Government to pay out £1.5 billion over the next three years to victims of the debacle that saw the mutual insurer totter to the verge of extinction in 2000 and policyholders' investment plans subsequently ravaged to rescue it from bankruptcy.

  The Government should be applauded for recognising the financial discrimination that many Equitable customers have suffered because of the failure of regulators to keep an eagle eye on the insurer during the Eighties and Nineties.

  But let's not kid ourselves that this is a happy end to one of the most shameful episodes in the financial services industry over the past decade — because it clearly is not. For a start, the compensation being paid is a fraction (one-fifth) of what stalwart campaign groups such as Equitable Members' Action Group claim is due.

  Indeed, EMAG, guided by the magnificent Paul Braithwaite, will continue to campaign for a bigger compensation package. I would not expect anything else from Braithwaite and his team, but I expect they will be flogging a dead horse given the straitened times in which we live.

  Second, the Government has excluded from compensation about 10,000 (pre-September 1992) with-profits annuitants on what can only be described as spurious financial grounds.

  Mark Hoban, Financial Secretary to the Treasury and mastermind of the compensation scheme, should review this decision as a matter of urgency because it is clearly wrong.

  But worst of all, what is most damning about this whole affair is that more than 50,000 Equitable Life policyholders have died while vainly waiting for compensation to come their way.

  Parliament and Gordon Brown in particular (the former Prime Minister, more than anyone else, prevaricated on the issue of compensation) should hang their heads in shame."

  Mail on Sunday, Jeff Prestridge. 3 July 2011

• "Equitable Life: An object lesson in how to fail at financial regulation.

  This will not be the end of the campaign for justice by Equitable savers — and we should not pretend that they have had anything but a raw deal.

  Everyone will welcome the promises made this week by those who will run the new Financial Conduct Authority, which replaces the Financial Services Authority next year. It swears it will not repeat the mistakes made by its predecessor over the past decade and beyond.

  Let us hope that proves to be the case — for as we are reminded today, the legacy of financial scandals can be enduring. The good news is that 11 years after the collapse of Equitable Life, the Government is finally going to start doing the right thing by the tens of thousands of affected savers. It would be churlish to note that ministers have cut it very fine on their commitment to dispatch the first compensation cheques to victims of the Equitable scandal by the end of June — at least those cheques, going in the post today, have finally been signed.

  However, this will not be the end of the campaign for justice by Equitable savers, and we should not pretend they have had anything but a raw deal — certainly collectively and, in the vast majority of cases, individually too.

  It was a surprise to many that last year's Coalition agreement explicitly recognised the repeated rulings by the Parliamentary Ombudsman that Equitable savers were let down by the regulatory system.

  That the agreement's commitment to compensate the losers in full was subsequently reneged upon was more predictable. The failings in this package are numerous. Despite their long wait, savers will get their money back in dribs and drabs over the next three years, rather than upfront. Inevitably, that means yet more Equitable victims will die before having received the compensation they are owed.

  Then there is the fact that thousands of Equitable savers are missing out altogether on redress. The terms of the pay-out exclude policyholders who did not begin saving during a narrow period of time: that will cost at least 10,000 victims of the scandal.

  Even those who are being compensated will be disappointed with the cheques they receive. To put it politely, not many people agree with the formula for calculating losses that ministers drew up.

  The best we can say about today's pay-outs is that this shoddy episode is finally drawing to a close. The disastrous, long-term results of a basic failure in regulatory practice should be studied by everyone now preparing for the next era of consumer protection in the financial services industry.

  Independent, David Prosser 30 June, 2011

• "Equitable Life compensation fight goes on for thousands.

  MPs will maintain pressure on the Government to include 10,000 Equitable Life policyholders who were left out of its £1.5 billion compensation package.

  Fabian Hamilton, Labour MP for Leeds North East and joint chairman of the all-party Parliamentary group Justice for Equitable Life Policyholders, has promised to take up the fight on behalf of the 10,000 customers who took out with-profits annuities before September 1992.

  He believes they have been unfairly excluded on the basis of ‘selective’ and erroneous data used by the Government to decide who qualified for compensation.

  While the Government has acknowledged that with-profits annuitants suffered most from the failure of regulators to monitor the insurer, leading to its near demise in 2000, it has divided these customers into two camps.

  While those 37,000 customers who took out with-profits annuities after September 1992 will receive 100% of their losses, earlier annuitants will get nothing.

  The Government argues these annuitants did not suffer overall losses because they benefited from generous bonus increases in the early years of their annuities.

  But research by the Equitable Members' Group (EMAG) suggests this is not the case and that many policyholders suffered devastating losses."

  Mail on Sunday, Jeff Prestridge 4 June, 2011

• "Equitable Life victims face more delays and disappointment in fight for compensation.

  Thousands of victims of the Equitable Life collapse face more delays in receiving compensation for their losses in the failed pension company. Some 37,000 pensioners will have part of their payments spread out over five years, dashing hopes they were in line for a lump-sum cheque this summer and raising concerns some may die before they receive the full amount. Details of the complicated compensation scheme were spelled out in a 50-page Treasury document published yesterday.

  A sum of £1.5billion will be paid in total to 945,000 victims. The first payments are due to be made by the end of next month, and £1billion will be handed out over the next three years. But campaigners say 10,000 of the oldest surviving pensioners have been ‘callously excluded from compensation’ and will receive nothing at all.

  And a million victims will remain in the dark on what they will receive for up to a year because the Treasury is sending out letters explaining the awards over a 12-month period. Some will not receive any payments until 2014.

  Policyholders have waited more than a decade for compensation after the company came to the brink of ruin in 2000. More than 30,000 have died over that time without receiving a penny because the Labour government resisted all attempts to come to a settlement.

  A coruscating report in 2008 by the Parliamentary Ombudsman, Ann Abraham, found wholesale maladministration on the part of the previous government and the regulators and recommended compensation should be paid.

  The Coalition promised to pay fair redress to policyholders who had lost out. Under its scheme, victims will receive sums equal to 22.4 per cent of the amount they lost, compared with if they had invested with a rival insurer.

  Campaigners dismissed the £1.5billion payout as ‘woefully inadequate’. The Equitable Members' Action Group argues victims should share in a total pot of £5–6billion.

  Spokesman Paul Braithwaite said:

  ‘It has taken the Government ten months to come out with a penny-pinching scheme to be eked out over the next five years. Why can't the victims, who've already waited a decade, be paid out their due this year?’

  The Treasury admits that policyholders have suffered losses of £4.3billion compared with returns they would have earned with another provider. But it says it is paying a lesser sum due to ‘pressures on the public purse’.

  A spokesman added:

  ‘There has been no delay. We said we would begin paying compensation in June and that is what we are doing. Through spreading the payments we can afford to give people more money.
  ‘The compensation will cover people who took out policies between 1 September 1992 and 31 December 2000."

  The Daily Mail, Ruth Sunderland 17 May, 2011

• "The Financial Secretary to the Treasury (Mr Mark Hoban):

  I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate...
  It is also important to note that, even in the midst of last year's understandably constrained spending review, we still found a way to cover the losses of the with-profits or trapped annuitants in full. That was achieved by paying their losses through annual payments that reflected the structure of their policy. Those policyholders were particularly vulnerable to their losses because they were unable to move their funds elsewhere or mitigate the impact of their losses through employment. They were also generally the oldest policyholders.
  The hon. Member for Central Ayrshire raised his concerns about the exclusion of those with-profits annuitants who purchased their policy before September 1992 from the scheme. He is not the first to do so, but this is an important opportunity to restate what I have said in correspondence to a number of hon. Members and what I said in the Committee that considered the 2010 Act. In her report, the ombudsman recommended that the aim of the scheme should be ‘to put those people who suffered a relative loss back into the position that they would have been in had maladministration not occurred’.
  With-profits annuitants who bought their policies before September 1992 did so before maladministration could have affected their investment decision. The first returns that the ombudsman found were affected by maladministration were those of 1991, which would not have influenced policyholders' decisions until September 1992. Once a with-profits annuitant had purchased their policy, they did not have the option to move it elsewhere. Therefore, the correct question is not what these policyholders would have received if they had invested in a different company or had transferred their policies at some date after September 1992, but how their Equitable Life policy would have performed if maladministration had not occurred. Calculations by Towers Watson show that, if there had been no maladministration, those policies would not have performed better than they actually did, so no loss has been suffered.
  For pre-September 1992 with-profits annuitants, the reduction in the levels of annuity payments is largely due to a combination of circumstances, such as poor investment market performance and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing...
  I will be placing a scheme design document before Parliament imminently. In that document, hon. Members will find details on how the new payment scheme will work, including information on who will receive payments, how those payments will be calculated and how they will be made...
  I want to make one final point to set policyholders' minds at rest. Policyholders do not need to do anything to claim their payments. Those operating the scheme will contact them in the first instance. A website and call centre will be up and running for the duration of the scheme to guide policyholders and address any queries they may have.

  Mr Donohoe:

  Will the Minister tell me for how long the scheme will be up and running and whether payments will be made over a three-year cycle?

  Mr Hoban:

  The hon. Gentleman has raised an important point. We need to distinguish between two groups. The first is the eligible with-profits annuitants. Payments will be made to them over the lifetime of their policy. That has enabled us to extend the cost of this beyond the spending review and therefore to spend more on resolving the problem than would otherwise have been the case.
  Other policyholders who have suffered losses and are eligible for compensation will receive a single payment at some point over the next three years, with priority being given to the oldest policyholders and the estates of deceased policyholders. That is to ensure the cost of the scheme is manageable and that the scheme is deliverable in the period. We have spent a lot of time making sure that the administration and delivery of the scheme works as effectively and as quickly as possible. However, I do not want to give any false promises to people. We said that we would start to make payments before the end of next month. It is a three-year scheme for people, apart from for those who are with-profits annuitants. For with-profits annuitants, payments will be made over their lifetimes, which is the right way to maximise the amount of money available to policyholders given the economic situation that we inherited..."

  Hansard for 4 May, 2011 Westminster Hall, Commons adjournment debate on Equitable Life.

• "Revealed: Why SFO failed to pursue Equitable Life.

  The Serious Fraud Office decided to drop an investigation into Equitable Life because financial regulators were already aware of potential criminal activity at the failed insurer, according to an explosive new document.

  The 19–page ‘vetting note’ dating from December 2005 has been published following a Freedom of Information request. Its contents are highly embarrassing for the regulators meant to be overseeing the mutual insurer in the run-up to its collapse.

  In a key passage the document states:

  ‘...in very many cases, transactions, activities and representations which might be considered to be criminal offences were known to the regulators.’

  It added:

  ‘It is therefore very likely that potential defendants would raise many defences based on having disclosed what they were doing to the regulators and having received their approval, or at least not received their disapproval...’

  The SFO probed the insurer in March 2004 after the publication of a damning report into its collapse by Lord Penrose. But in December 2005 it angered policyholders by announcing it would not press ahead with a criminal investigation.

  The Mail last month revealed how the SFO had been ordered to publish its reasons by the Information Commissioner's Office — a body set up to protect the public's right to data.

  It followed a Freedom of Information request lodged two years ago by equitable victim Stephen Wynn.

  The SFO ruled that prosecuting former directors could ‘lead to a further loss of confidence in the pensions industry as a whole’. It stated there ‘is a potential that all the Society's sales of pension products to individuals between 1982 and 2000 were mis-sold’.

  However, it concluded:

  ‘This again is a matter for the regulator or for civil action and not for criminal prosecution.’

  The SFO said the closest Equitable came to committing investment fraud was when it launched an advertising campaign to attract new investment, despite being close to collapse. However, it concluded this made ‘commercial sense’ and was ‘almost certainly conducted honestly’ to attract a buyer for the firm.

  The revelations have angered Equitable's policyholders who have been fighting for compensation for over a decade. The Coalition government announced a £1.5billion compensation package for victims last October, but victims say this represents a fraction of their losses.

  Paul Weir, spokesman for the Equitable Life Members' Action Group EMAG, said:

  ‘The regulators were obviously up to their neck in this and knew exactly what was going on. We will continue to fight for proper compensation.’

  The FSA declined to comment."

  Daily Mail, by James Salmon 9 April 2011

• ‘We will haunt MPs until they put this grave injustice right’

  Equitable Life campaigner vows to continue the fight for more compensation. Although Equitable Life's announcement is a bit of good news for some departing policyholders, it will not benefit the vast majority who are looking at losses of 85pc — despite the compensation due to be paid by the Government.

  In spite of collective losses in excess of £6bn, the Government is proposing to pay 945,000 victims of the Equitable Life scandal just 15pc of the amount they have actually lost.

  This means that someone who has lost £50,000 from their pension pot may receive just £7,500 in compensation at some point between now and 2014. It is unclear whether any further interest will be paid to compensate for the delay.

  The Government has already admitted that victims' losses exceed £4bn, but the Equitable Members' Action Group (EMAG) reckons they are closer to £6.3bn when maladministration from 1991 and exit penalties are taken into account.

  The £775m allocated for non with-profits annuitants means that victims can expect to get just 15pc of their losses. EMAG will be renewing its campaign to press for full compensation by the end of this parliament. We know from our bulging postbag that our members are furious at what they see as a broken pledge from the coalition.

  We are restructuring EMAG to assist local groups who will be visiting their MPs to express their anger and to ensure that they do not think the ‘Equitable problem’ is dealt with. Our members will be relentless in pressing for the compensation they deserve. The Government has made a big mistake and we will haunt MPs until they put this grave injustice right.

  We are also demanding that the Government urgently reconsider its decision to exclude an estimated 10,000 with-profits annuitants who had the misfortune to take their pension between 1987 and 1992. It is shameful that these pensioners have been excluded from receiving anything at all. By definition these people are likely to be even older and more frail than the post-1992 with-profits annuitants that the Government said were the most deserving of 100pc compensation.

  The Government claims that they have made excessive gains and should not be compensated at all. But EMAG has obtained the pension income figures for a number of these annuitants — for policies started both before and after the cut-off date of September 1 1992.

  This data shows a remarkable consistency between the losses of both groups. Typically their annual pensions continued paying out roughly the same amount until 2003 when they started to plummet thanks to falling bonus rates. By 2011 most of these annuitants have seen their pension income slashed by around 60pc. And it is still going down, every year.

  Since compensation for other annuitants is designed to offset any gains against losses, we would argue that if what the Treasury claims about excessive gains is true then there would be no cost incurred by including the pre-1992 annuitants in the same scheme on the same basis. If they really have lost nothing, then no compensation would be due.

  However, if, as EMAG claims, they did lose, then the Government would have to find more money to put matters right.

  Time is short — the average age of these annuitants is 85 and many may not live to see any compensation unless the Government acts this year. We estimate the cost at about £150m, or £50m a year for the next three years. This contrasts with the £620m promised to the 37,000 people who took out a with-profits annuity after 1992.

  A caring, compassionate government would ignore the technicalities and make ex-gratia payments available to these annuitants now, on the same basis of calculation as that applied to those whose policies started after 1992.

  We call on the Government to honour the spirit of its election pledge to Equitable Life victims and to right this disgraceful wrong immediately.

  Daily Telegraph, by Paul Weir of EMAG 28th Mar 2011

• "The Serious Fraud Office (SFO) has been ordered to justify its decision not to pursue an investigation into collapsed insurer Equitable Life following a freedom of information request from an angry policyholder.

  The Information Commissioner's Office - an independent body set up to protect the public's right to data — has instructed the SFO to release a 'vetting note' setting out why it refused to carry out a criminal probe into the conduct of the insurer's former management.

  The SFO looked into the insurer in March 2004 after the publication of a report into its downfall by Lord Penrose but in December 2005 announced it had decided not to proceed with an investigation.

  The commissioner's order to publish the information behind that decision follows a request from Equitable victim Stephen Wynn from Brighton.

  In a detailed 22-page letter, the commissioner said some information had been ‘incorrectly withheld‘ by the SFO and that the organisation had kept faulty records relating to the Equitable case.

  Phillippa Williamson, the SFO's chief executive, said that despite an extensive search she was unable to locate various legal advice documents the commissioner had inquired about, and acknowledged that errors existed in record-keeping. She added that steps are being taken to improve systems.

  Paul Braithwaite of the Equitable Members Action Group, said: ‘I think it was a cynical act by the Treasury to park it at the SFO where it sat for more than a year. I don't believe for a moment it was properly investigated.

  ‘I think the conclusion is very obvious that the SFO have good reason to seek to conceal their behaviour. It is shocking but typical that documents have gone missing.’

  The Equitable revelations are a fresh embarrassment for the SFO, which was heavily criticised for dropping its inquiry into allegations of corruption at arms manufacturer BAE Systems.

  It argued that releasing the Equitable information could affect its ability to conduct a potential prosecution even though no moves have been made to do so for more than seven years.

  Officials at the SFO have 35 days from the date of the ruling on March 3 to comply or risk being found in contempt of court.

  The commissioner also highlighted concerns including ‘some difficulty in confirming the scope of the withheld information’ and noted that some of the information given to him ‘does not appear to relate to Equitable Life’.

  The SFO is considering whether to appeal."

  The Daily Mail, by Ruth Sunderland 16 March 2011

• "Commission's report outlines Equitable Life payments: Victims of collapsed insurer Equitable Life will receive payments equivalent to 22.4% of their ‘relative loss,’ the government has announced.

  The Treasury's Independent Commission on Equitable Life Payments' Report said the oldest policyholders should receive compensation first, followed by the estates of deceased policyholders and the estates of those who die before receiving payment in the next three years.

  The 130-page report recommends that around 945,000 policyholders should receive payments equivalent to 22.4 per cent of their relative losses while the remaining 100,000 policyholders with relative losses should receive no payment because their proportionate allocation amounts to less than £10.

  The report also said that almost 70% of 11,250 known eligible estates could receive payment in the first year; while 95% of all eligible policyholders over the age of 75 could receive their payment in the first year of the payments scheme.

  All eligible policyholders aged more than 60 with individual, as opposed to group scheme, policies could receive their payment in the first year.

  The Treasury will publish a scheme design document setting out the practical implications of the recommendations along with a timetable for making payments It will also include details of the complaints and challenges procedure.

  Mark Hoban, financial secretary to the Treasury, said: "We have always been committed to making fair and transparent payments to Equitable Life policyholders through an independently designed payment scheme for their relative loss as a result of regulatory failure...

  Mr Pomeroy, chairman of the commission, said:

  ‘The government has accepted all our recommended principles. The commission has listened carefully to the views of interested parties and we believe that our conclusions will deliver an outcome that is simple, transparent and fair for policyholders..."

  Financial Adviser, by Marc Shoffman 3 Feb,'11

• "...The Government this week confirmed that 945,000 present and former policyholders will share compensation of £775 million, equating to just 22% of their losses — though the Equitable Members Action Group has said the real figure is 15%. In an independent assessment, actuaries Towers Watson calculated the total loss of this group at £3.5 billion.

  Equitable’s 37,000 with-profits annuitants, who have had no choice but to stay with the holed insurer, will receive 100% compensation, sharing £620m paid out over time.

  EMAG said: ‘We are digging in for a long campaign to get the rest.’

  But the Government said it was accepting the recommendations of its independent commission. Losses would be assessed on a per policyholder basis, and the payments would not be means-tested.

  Compensation would be paid to the oldest policyholders first, and the estates of deceased policyholders and those of people who die before receiving a payment would also be prioritised.

  The Government will publish a scheme design setting out when payments will be made, which will be scrutinised by MPs in the spring — but after a decade of debate the payout has effectively been finalised.

  Financial Secretary to the Treasury Mark Hoban said:

  ‘We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure. I am grateful for the work the commission has done to establish policyholders’ concerns and have used this to recommend the principles of the payment scheme...’

  Paul Weir, of EMAG, said: ‘Just before the election, politicians were falling over themselves to appear to back us, but what has been delivered is not what we have waited all these years for.’

  He added: ‘If we have to wait until the next election to use our votes again to show what we think of their compensation package, then we will do that.’ Mr Weir lost an estimated £50,000 from his pension pot, but is due just £7500 in compensation.

  Ros Altmann, director general of the over-50s campaign group Saga, said the settlement was ‘a far cry from the recommendation’ of the parliamentary ombudsman, who had urged the Government to compensate victims in full for over £4 billion of losses.’

  The Herald, by Simon Bain. 5 February, 2011

• "David Cameron’s deal on Equitable Life payouts ‘a slap in the face’:

  Equitable Life policyholders said that they had been given a ‘slap in the face’ by a government announcement that they would only get back a quarter of the money they lost.

  David Cameron was accused of ‘cynically’ raising the hopes of more than a million policyholders by promising when in opposition to ‘sort out’ Equitable Life, only to limit payments to the level agreed by the last government.

  The awarding of ‘proper’ compensation to Equitable victims was included in both the Conservative and Liberal Democrat election manifestos.

  All 97 MPs on the Tory front bench team signed a pledge to the policyholders’ action group to introduce adequate payments. But the exact amount of compensation was never specified. Yesterday, the Treasury announced that 945,000 with-profits policyholders would receive 22.4 per cent of their losses, with younger members having to wait up to three years for payments.

  The figure was similar to that set by a retired judge as part of a review led by the Labour government, which was heavily criticised by the Conservatives.

  Paul Weir, of the Equitable Life Action Group, accused Mr Cameron of making his pre-election pledge to win the votes of policyholders, despite knowing it would be unlikely that cash could be found to deliver his promise.

  ‘This is a slap in the face for Equitable Life policyholders, and it is certainly not what we voted for in May. Just before the election, politicians were falling over themselves to appear to back us, but what has been delivered is not what we have waited all these years for.

  ‘Even as they were playing footsie with us, signing our pledge, they were already planning to renege on it. It’s not like they opened the cupboard and suddenly found out the money wasn’t there.

  ‘If we have to wait until the next election to use our votes again to show what we think of their compensation package, then we will do that.’

  Mark Hoban, a Treasury minister, said: ‘We have always been committed to making fair and transparent payments to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure.’

  The Government had previously announced that another 37,000 people with Equitable Life annuities would be compensated for their losses in full, with regular payments for life. Large numbers of victims have already died before receiving compensation.

  Mr Hoban said that their estates would be the first to receive the new compensation awards for with-profits policyholders, along with elderly members.

  But younger people could have to wait until 2014 — 14 years after the scandal broke — with a total of £775million due to be paid out to without-profits policyholders, with no interest."

  Daily Telegraph, by Rosa Prince, 26 Jan 2011

• "Key questions on Equitable for Mr Hoban: Mark Hoban, Financial Secretary to the Treasury, will be grilled by the Equitable Life all-party group of MPs on Wednesday over his £1.5billion compensation deal for victims of maladministration at the mutual.

  Although I possess no crystal ball, it should be a fiery meeting as some MPs — fired up by angry constituents — ask him to justify the way he has decided to cut the compensation cake.

  In particular, they will question why he has authorised 100 per cent compensation for 37,000 with-profits annuitants, while ruling out compensation for 10,000 earlier annuitants (essentially those who took them out before September 1992).

  On average, all other Equitable victims will receive compensation equivalent to 20 per cent of their maladministration losses, although the precise terms of distribution have been left to an independent commission that will report by the end of the month. Hoban, no doubt, will tough it out, buoyed by the fact that the Equitable Life (Payments) Bill received Royal Assent just before Christmas, paving the way for compensation.

  But at the very least, he must provide MPs with answers to three key questions:

  First, how can he defend the exclusion of 10,000 with-profits annuitants from compensation on the spurious grounds that they received overpayments in the early years (as a result of the mutual paying too much in bonuses) when all the evidence suggests they have suffered just as much financially as other with-profits annuitants?

  The splendid Equitable Members’ Action Group says it would cost less than £200 million to offer these people compensation. Given that the Treasury has a £100 million ‘contingency’ fund built in to the overall £1.5billion package, surely this money could be used to provide some compensation to these forgotten Equitable victims?

  Second, did Hoban mislead MPs into voting against an amendment tabled by Fabian Hamilton (Labour MP for Leeds north East) last November that would have extended compensation to all with profits annuitants, irrespective of when they took out the annuities?

  Anecdotal evidence suggests some MPs felt they were tricked.

  And third, why have payments not yet begun for the 37,000 with-profits annuitants who are due compensation?

  There is no reason why these should not start immediately, given that many of these people are elderly and desperate for compensation. The Treasury knows who they are, possesses their details and, given it is administering their compensation directly (as opposed to the independent commission), it should start paying now.

  Of course, Hoban must be applauded for sorting out the Equitable ‘issue’ after ten years of Labour procrastination. Particularly so in light of the parlous state of the country’s finances. But any resolution should be fair, not soured by injustice."

  Mail on Sunday, by Jeff Prestridge 9 January, 2011

• Equitable crusader stays out of compensation fight.

  Equitable Life policyholders have suffered a setback in their campaign for higher compensation after the Parliamentary Ombudsman distanced herself from their call. Ann Abraham, a consistently champion of policyholders at the insurer, has told a cross-party group of MPs that it was not her job to question a payout scheme that has received parliamentary approval.

  In a letter sent to MPs, and passed to The Times, Ms Abraham also wrote:

  ‘While I recognise that some of the people who complained to me will be extremely disappointed by the Government’s decisions on affordability and eligibility, I cannot say that those decisions are incompatible with the recommendations in my report.’

  Her comments will come as a blow to Equitable campaign groups, which have already expressed dismay at the Government’s plans to pay out £1.5 billion to policyholders in stages, beginning next year.

  The payout, agreed after years of wrangling, represents as little as 15% of the amount lost by savers in Equitable’s near demise a decade ago.

  Equitable, at the time Europe’s biggest mutual, had to close to new business following the House of Lords ruling in 2000 that it had to honour its financial obligations to customers holding guaranteed annuity policies. This left it facing £1.5 billion in liabilities. More than a million customers lost out when the society slashed bonus payouts, with hundreds of thousands seeing the value of their retirement nest eggs halved.

  In a hard–hitting report published last year, Ms Abraham found successive governments guilty of a ‘decade of regulatory failure’ for failing to spot Equitable’s problems.

  Having initially rejected all but four of Ms Abraham’s ten counts of maladministration, the Government backed down earlier this year and accepted her findings in full. She had demanded a compensation fund be set up within six months of her report being published in July 2008. She said policyholders should have been compensated for their ‘relative losses’ — their financial suffering set against potential returns from investing elsewhere — a figure accepted as £4.8 billion.

  The Times, Miles Costello, 24 Dec 2010

• "Equitable Life pressure group goes to court over ‘derisory’ payout. After years of campaigning for compensation, lobby group EMAG is squaring up for a courtroom battle with the Treasury next year.

  The lobby group for policyholders unveils plans to sue the Treasury over a ‘derisory’ £1.5 billion compensation scheme.

  The lobby group for Equitable Life policyholders vowed to pile the pressure on the Government yesterday as it unveiled plans to sue the Treasury over a ‘derisory’ £1.5 billion compensation scheme.

  EMAG, which has been campaigning for a decade on behalf of one million Equitable policyholders, has kicked off a legal process that should lead to a judicial review of the Treasury’s controversial payment scheme in February.

  Pending clearance from the Court, that could result in EMAG, which has won a previous legal showdown with the Government, squaring up for a courtroom battle with the Treasury during the first half of next year.

  Paul Braithwaite, EMAG’s general secretary, said:

  ‘We will pursue every legal and political avenue open to us to get proper justice for our members. We believe that the current package is unfair and it’s not the proper compensation coalition MPs promised to fight for.’

  It is the latest move by EMAG, which has 40,000 members and a sizeable fighting fund, since the Treasury dismayed policyholders in October when it published its compensation proposals for customers of the near collapsed mutual.

  George Osborne, the Chancellor, has proposed a £1.5 billion package spread over three years, and promised to prioritise Equitable’s most needy with–profits annuities policyholders.

  Payments, which Mr Osborne argues must take account of the Government’s cash–strapped finances, are due to begin next year. EMAG complains that thousands would miss out on compensation payments that are 85 per cent below the amount it expected.

  ‘We’re crying foul,’ an EMAG spokesman added. He said that the group would fund its legal action from its own resources, but said that it would have to go to members for additional contributions if the legal bill mounted.

  About 1.5 million policyholders lost out in 2000 when Equitable, Europe’s biggest mutual, was brought to the brink of collapse by a House of Lords ruling that it must honour obligations to guaranteed annuities customers.

  The £1.5 billion liability that this incurred forced Equitable to shut to new business and slash bonus payments. A core group of about 500,000 customers saw the value of their nest eggs halved overnight and tens of thousands have died during the ten–year campaign for financial remedies.

  The Government, with advice from Towers Watson, the pensions consultant, has accepted that the ‘relative losses’ suffered by Equitable members, who could have invested elsewhere, stands at £4.8 billion. EMAG, however, argues that the real figure for relative losses is £6.2 billion.

  EMAG, which is being represented by the law firm Bindmans, is planning to contest Treasury calculations for the amounts of compensation, together with its decisions on who should receive benefits.

  About 10,000 customers who took out policies before a 1992 cut–off date will be excluded, for example. The Treasury has also ignored the costs incurred by policyholders who cancelled their Equitable policies and switched elsewhere to try to recoup savings.

  The Treasury plans to respond in writing on December 23rd to EMAG’s proposed legal action.

  The Times, Miles Costello 10 December, 2010

  EMAG’s press release about exploring a Judicial Review against the Treasury’s compensation plan.

• "Europe backs Equitable Life campaign. European politicians have thrown their weight behind Equitable Life campaigners, describing the UK Government’s attempts to compensate victims of the scandal as a ‘sorry and shabby business’. On Friday, the Independent Commission on Equitable Life Payments (ICELP) will close its first consultation as it looks to advise the coalition Government on how to compensate policyholders.

  Members of the European Parliament debated the issue at a Petitions Committee ahead of the closure of a key UK consultation on plans to hand £1.5bn to policyholders, a decade after the company’s near–collapse. Mairead McGuinness, chairman of the committee, said she was concerned to hear about the ‘injustice among policyholders’ amid accusations that the level of compensation is well below the £4bn to £5bn hoped for by some policyholders.

  Alex Voss, a centre–right German MEP, added that he would like to hear more from the UK Parlimentary Ombudsman, Ann Abrahams, who submitted a written statement to the Petitions Committee in which she distanced herself from proposals to pay reduced amounts of compensation to Equitable’s victims.

  In 2008, Ms Abraham delivered a damning report which found 10 instances of maladministration by regulators and Whitehall officials leading up to 2001. She called for the previous Government to apologise and set up an independent tribunal to calculate compensation for them. However, the Labour administration refused to accept the report’s findings.

  On Friday, the Independent Commission on Equitable Life Payments (ICELP) will close its first consultation as it looks to advise the coalition Government on how to compensate policyholders.

  Investors, mainly professional people saving for their retirement, lost up to half their savings when the company came close to collapse.

  Under the terms of the proposed scheme, £620m of the £1.5bn would be used to cover the full cost of ‘relative’ losses suffered by the 37,000 with–profits annuitants. However, The Equitable Life Members Action Group (EMAG) has warned that another 600,000 policyholders who lost substantial amounts look set to receive less than a quarter of the Treasury’s calculated losses.

  Paul Weir, EMAG director, said ICELP had the ‘impossible task of sharing out the remnants of an inadequate pot of money’.

  ‘EMAG deplores that the Treasury has retrospectively clawed back the core responsibility that the Ombudsman intended for the independent Commission: to decide the allocation of compensation between the different policyholder classes and to design and administer the scheme. This is now firmly back in the clutches of the not–to–be trusted Treasury, one of the regulators the Ombudsman found culpable.’ "

  Daily Telegraph, Jamie Dunkley 3 Dec, 2010

• "A battle is lost but Equitable war rages on: Financial Mail trusts Mark Hoban, Financial Secretary to the Treasury, knows what he is getting into by refusing to listen to those who passionately believe the current Equitable Life compensation package is seriously flawed.

  Yet again the war drums are beginning to beat and although policyholders would never resort to the violent tactics of some students over university fees, Hoban would be foolish if he thought these elderly people will go off quietly into the night. They won’t — as ten years of fighting for financial justice already proves...

  ...in moving hastily, Hoban is in danger of dishing out serious financial injustice, especially to those 10,000 ‘early’ with-profits annuitants excluded from compensation on the spurious grounds that they were as much financial winners from regulatory maladministration as they were losers...

  In the House of Commons earlier this month, Hoban used the following figures to justify why pre–1992 with–profits annuitants should not receive compensation. He said a with–profits annuitant who received annual income of £7,200 in 1989 would have received £10,000 in 1993, rising to £17,000 in 2002. The early uplift in income, a result of Equitable Life overpaying bonuses, Hoban said, more than made up for the cuts post–2002. In other words, they have not suffered financial loss as a result of maladministration.

  This is poppycock because Towers Watson’s figures don’t tally with numbers supplied by with–profits annuitants who have contacted Financial Mail...

  In the debate that Hoban produced his spurious figures, Fabian Hamilton, Labour MP for Leeds North East, attempted to bring in an amendment ensuring all with–profits annuitants received compensation...

  Peter, 84, who served on HMS King George V during the Second World War in the Pacific watched the debate on TV in the hope that Hamilton’s amendment would get voted through. It didn’t.

  He told Financial Mail on Friday: ’We older pensioners are not asking for charity, but would welcome proper consideration of the situation. We listen to politicians promising fairness and telling us that “we are all in this together”.

  ’We then watch a handful of MPs debate an issue so important to old pensioners and then listen (with no surprise) to the result of the division — 70 in favour of Hamilton’s amendment and a whopping 301 against, voting as instructed.’

  Peter feels cheated — and has told Hoban so in a letter. His view is shared by all 10,000 early with profits annuitants. Maybe, Hoban feels these with–profits annuitants (all elderly) will quietly go away or die...

  The Equitable Life debacle, it seems, is far from over. There are more wars to be fought before justice can be seen to be done."

  Jeff Prestridge, Mail on Sunday 28th November, 2010

• Mark Hoban:"Let me explain why 1 September 1992 is a logical, not arbitrary, date. The Ombudsman indicated in her report that there were problems with the regulatory returns for 1991, and that those could influence policyholder behaviour.

  However, they could not have come to the attention of policyholders, and prospective policyholders, before they were submitted at the end of June 1992. No policyholder would have been aware of that regulatory failure until the returns had been published. It is unlikely that those returns would have come to anyone’s attention prior to 1 September 1992.

  I stress that the date is not arbitrary, but a consequence of the ombudsman’s findings and how they impact on what policyholders would have been aware of. Policyholders would not have been aware of the regulatory failure until the autumn of 1992...

  The Ombudsman is concerned about people who invested in Equitable Life who might not have done so had they been aware of that regulatory failure. That regulatory failure would not have been known to them until September 1992, so there is a clear, rational argument for 1 September 1992 being the right date to start the calculation of losses.

  We are excluding that group of people because they took out policies before any maladministration could have affected their investment decision...When people made the decision on the information available to them, the relevant information was not in the public domain, and would not have affected their investment decision until September 1992. That is a clear, logical, sensible starting point, based on principles and on the ombudsman’s findings, for the maladministration, and that is the point from which we should calculate relative loss for policyholders.

  Mark Durkan: The Minister is in danger of asking the Committee to accept the notion that customer ignorance can be a legislator’s excuse. That cannot be so. If the Minister is trying to say that what they did not know did them no harm, that is preposterous. They did not know, and they have suffered harm.

  Mr Hoban: I do not agree with that point. There is a clear principle: the basis on which people were investing in Equitable Life. At that point, no–one knew about the maladministration.

  We should also bear in mind the issue of practicality and the lack of information available to Equitable Life’s policyholders. Hon. Members should reflect on the fact that no one would have made investment decisions based on anything that happened prior to 1992 until that information was in the public domain. That is why the group has been excluded from the calculation of relative loss.

  Mr John Baron ...surely the central point is that annuitants who took out a policy pre ’92 suffered relative loss post ’92, courtesy of maladministration. To return to an earlier point, perhaps there is a moral duty to include such people in the compensation, as I believe that the parliamentary ombudsman suggested.

  Mr Hoban: The Parliamentary Ombudsman’s findings were clear: she said that the maladministration started in 1991, but that it would not have been obvious to policyholders until September 1992.

  Let me deal with two issues that hon. Members should have take into account in assessing the point. First, as has been mentioned, there are challenges around getting information for the pre ’92 period. Secondly, there is the point made by my hon. Friend the Member for Cardiff North about the timing of losses. We recognise that pre ’92 with-profits annuitants were affected by how Equitable Life was run. Sir John Chadwick and Towers Watson looked into what those WPAs would have received from Equitable Life had there been no maladministration. They concluded that they (the pre 1992s) received more from Equitable Life as a result of maladministration than they would have done had it been properly regulated. That was because Equitable Life paid out more to them in the early years than it would have done had there been no maladministration. Let me give an example to prove that.

  If a with–profits annuitant had purchased their policy in 1989 and gained through that purchase an income of £7,200, by 1993 the policyholder would have been receiving an annuity of approximately £10,000 per annum. Part of that sum was a result of the bonuses that had been declared on the policy since commencement. It is recognised that Equitable Life was paying higher bonuses than it could afford during the late ‘80s and early 1990s. If Equitable Life had not been over-bonusing during that period, Towers Watson has calculated that the policyholder would have received only £9,500 per year. It is a consequence of the maladministration that the policyholder is receiving £500 more than he or she should have during that period.

  Equitable Life continued to overpay bonuses throughout most of the 1990s. As a result, by 2002 that policyholder was receiving £17,000 per annum. If the over-bonusing had not taken place, the policyholder would have received only £15,800, so he or she was still receiving more as a consequence of maladministration.

  In 2003, Equitable Life cut the rate of annuity payments to its with-profits policyholders by about 20%. In the absence of maladministration, the value of payments to with-profits policyholders would also have been cut, although, owing to market performance, by only 18%. After the cuts in 2003, our example policyholder was receiving £12,900 per year from Equitable Life. Had there been no maladministration, he or she would have been receiving only £12,300. I hope that that example has helped to clarify the consequences of maladministration, namely that even after the cuts in 2003 policyholders are still receiving more than they would have if Equitable Life had been properly regulated. For a range of reasons, their plight is not as it has been represented.

  The first question to be asked, then, is "When did maladministration affect policyholders and the decisions that were made?" The second relates to the practicality of extracting data pre-1992, which is well established and has been well aired in the Chadwick report and elsewhere; and the third concerns the consequence of maladministration in Equitable Life, which is that with-profits annuitants are receiving more over the lifetime of their policy than they would have received if that maladministration had not taken place.

  Jonathan Evans: I was interested in the way in which my hon. Friend dealt with my point about over–bonusing, but I feel that he has undermined another point that I made: I suggested that it was not possible to make such calculations, but my hon. Friend has suggested that Towers Watson has done so. In a sense that also undermines the thrust of why the pre–1992 policyholders should be excluded. I had assumed that they might not have been disadvantaged and that it was too difficult to work out the numbers, but if Towers Watson has worked out those numbers and there is no relative loss, it seems a bit odd not to include them, at least for the purpose of calculating the position and telling them that there is no loss..."

  Read the whole Committee Stages and Third Reading of the Equitable Life payment Bill, 10 November 2010

• Fury as 10,000 Equitable Life pensioners miss out.

  More than 10,000 pensioners who took out with-profits annuities in the late Eighties and early Nineties with Equitable Life have been excluded from the Government's £1.5billion compensation, announced as part of the spending review.

  The decision has sparked outrage among pressure groups representing annuitants, who claim that the Government has turned the payment of compensation into a ‘lottery’.

  The Treasury confirmed on Friday that with–profits annuities taken out before September 1992 are excluded. But those who set up policies later — about 37,000 customers — are included.

  The September 1992 cut–off date has been imposed because the Treasury claims annuitants who bought earlier did not make investment decisions that were affected by the Government's maladministration of Equitable Life, leading to the mutual's near-meltdown in 2000.

  The £1.5 billion package is compensation for the relative losses suffered by policyholders as a result of the failure of previous governments to regulate the mutual effectively.

  Peter Scawen of pressure group Equitable Life Trapped Annuitants says the cut–off date is ‘unfair and unreasonable’ because all with–profits annuitants have been victims of maladministration.

  ‘Once bought, these annuities could not be exchanged, so every annuitant has suffered from the consequences of regulatory failure, irrespective of when they took them out,’ he says. ‘The decision is illogical and I'm appalled.’

  Scawen also says the Treasury’s cut–off date ignores the views of Parliamentary Ombudsman Ann Abraham and Lord Chadwick, who in the past have both made recommendations on the extent of Government compensation.

  He adds: ‘Even Chadwick, who came up with a much smaller overall compensation package than the £1.5 billion now on the table, said that pre–1992 with-profits annuitants should not be excluded. A review of this crass decision must be made urgently.’ ...

  Paul Braithwaite of the Equitable Members Action Group says the Government's compensation package has turned into a lottery.

  ‘Some with-profits annuitants will do fine, others are questionable grounds, while 600,000 other victims of regulatory failure will barely get back 20 per cent of their losses,’ he says.

  Mail on Sunday, by Jeff Prestridge 24 October 2010

• "Equitable Life pay-out of £1.5bn. Some 1.5 million policyholders with Equitable Life will receive a share of a total of £1.5bn in compensation, the chancellor has confirmed.

  As expected, George Osborne said that the compensation payments would start in 2011.

  Those who were hardest hit because they had already started taking their pensions through ‘with–profits’ annuities will benefit the most...

  Campaigners said that compensation should be at about £5bn, but a later review by Sir John Chadwick — ordered by the last Labour government — said that the pay-out should only total about £340m. He said that the investors’ absolute loss was between £2.9bn and £3.7bn but their compensation should be capped for each policyholder at a fifth of that.

  The chancellor rejected this view, but said the pay–out should be affordable.

  ‘I agree with the Ombudsman that the relative loss suffered is the difference between what policyholders actually received from their policies, and what they would have received elsewhere,’

  Mr Osborne told the Commons...

  The Treasury said that a group of 37,000 people would receive annual payments over their lifetime because they had faced the biggest upheaval. Those people — many of whom are aged over 75 — held with–profits annuities and so were already taking a pension. They were particularly vulnerable to reductions in the value of their policies because they were trapped by being unable to move their funds elsewhere. On average they lost £16,500 each, the Treasury said. The regular payments, totalling £620m and which will come from the £1.5bn pot, will effectively replace the money they have lost...

  Mark Hoban said:

  ‘For other policyholders, we shall be providing a level of funding for the payment scheme that strikes a fair balance between the interests of policyholders and those of taxpayers in the current difficult financial circumstances.’

  Paul Braithwaite, of the Equitable Members Action Group, said that the announcement by the government was ‘cynically’ timed and a disappointment. It could prompt a legal challenge from campaigners, he added. ‘We are shocked at the deplorably low level of the proposed payout. It effectively means that 600,000 serious pensions savers will have 75% cuts,’ he said.

  He said the £620m was a ‘woeful underestimate’ of losses suffered by those with the with-profits annuities.

  He was also unhappy that those who had bought one of these annuities before September 1992 would not be compensated. These people numbered an estimated 10,000, he said..."

  BBC website 20 October 2010

• An enormous amount of new material has been published since 15th October, causing EMAG’s small secretariat severe overload. We are being inundated with calls, emails, media enquiries whilst we try to process and interpret the new material. Obviously, EMAG intends to put the key documents and editorial comment on this website. Meanwhile, please bear with us. It will be Friday before that will happen.

  The situation is that the Coalition completely ignored the PASC select committee report published on 15 October.

  37,000 lucky with–profits annuitants are reported as to receive 100% of their "relative losses", but only those who took out their pension out after September 1992 are included. Payments will be made annually to those lucky annuitants as long as they live, starting in Summer 2011. A small victory for EMAG, ELTA and supportive MPs. But thousands more pre–1992 Annuitants will get NOTHING.

  However, something like 600,000 other policyholders who lost substantial money look like receiving less than a quarter of the Treasury’s calculated losses — which EMAG believes are understated by at least one billion pounds.

  Those payments will be spread over three years, starting next summer. This disparity is certainly not the justice intended by the PO. Ministry cuts averaged only 19%. But the cut to compensation is greater than 75%. Grossly unfair and thousands of victims will be outraged.

  To make the announcement in the Comprehensive Spending Review (CSR) was profoundly cynical of the Treasury — a Jo Moore day to bury bad news.

  The independent Commission, who EMAG will see again on 29th October, has had its remit emaciated and will now have no involvement with the with–profits annuitants.

  EMAG is exploring all options, including legal, and we will certainly be keeping the political pressure up and we encourage you to ask your MP to join the new all–party group and to apply pressure through the Committee stage of the compensation Bill.

• "MPs urge review of Equitable Life compensation report. MPs are urging the Government to revisit a recent report on how much compensation should be paid to Equitable Life policyholders who lost money in the insurer’s near–collapse a decade ago.

  The call came after Mark Hoban MP, financial secretary to the Treasury, yesterday told the Public Administration Select Committee that a distribution of losses showed that just over a quarter of policyholders suffered no loss at all and about 40pc lost between £1 and £1,000.

  Next week’s Spending Review will reveal the size of compensation pool the Government is setting aside for Equitable policy–holders.

  During the meeting yesterday, Mr Hoban came under fire as he was asked why he did not seek to change the terms of reference for the Chadwick Report into the payout back in May.

  Published in July, Sir John Chadwick’s review indicated 1.5m policy holders had lost up to £4.8bn between them, but that compensation should be between £400m to £500m.

  However, a 2008 report — based on different terms of reference — by Ann Abraham, the Parliamentary Ombudsman, suggested compensation should be between £4bn to £4.8bn. Activists for policy–holders are worried the payout could be closer to Sir John’s figure.

  In a report due to be published today, the committee recommended the Government ‘re–engages Sir John to establish what conclusions he would reach under terms of reference which all reflect all 10 of the Ombudsman’s findings’. They added a review need not delay the payouts.

  Mr Hoban told the meeting there were elements of Sir John’s report which enabled the process to progress. He added that revisiting the report would ‘delay justice for policyholders’. A Treasury spokesman said the committee report would be carefully considered.

  Paul Braithwaite, general secretary of the Equitable Members Action Group, said he welcomed the review, but was ‘astonished’ that it would not be done by an independent commission that was set up to decide on how to pay compensation. He added the size of the payment ‘should not be rushed through and buried under the ministerial operational budgetary cuts’."

  Daily Telegraph, by Rachel Cooper, 15 October 2010

• "Dear Mark, Further to our meeting on the 7th September, we have had various exchanges of correspondence with Towers Watson and it is now appropriate for us to comment on their Stage 2 aggregate loss in the range £4.0bn - £4.8bn.

  Transparency: We are sorry to report that there has been little transparency about the information provided to us. For example, Towers Watson claim to be incapable of estimating the percentage of the fund represented by with profits annuities or of estimating the 'relative loss' incurred by premiums paid between July 1991 and December 1992. The information provided in respect of with profits annuities has been entirely inadequate and they refuse to provide any information in respect of specific policies. In short, they refuse to do top-down estimates and won't provide comprehensive bottom-up calculations. When we met you on the 24th of May you assured us that the Coalition's commitment to the Parliamentary Ombudsman's recommendations and to transparency had been communicated to your Treasury officials and to Towers Watson. Our experience is that the message has not got through.

  Timing: EMAG repeatedly requested access to Towers Watson's calculations of 'relative loss' from soon after your appointment in May. The tightness of the timing derives entirely from the long delay by the Treasury and Towers Watson in not providing any material information until September.

  Assessment: Subject to the above lack of transparency and to the matters mentioned below, we do believe that the Towers Watson Stage 2 estimate has been properly prepared and can form the basis of an accurate assessment of 'relative loss' as recommended by the Parliamentary Ombudsman.

  The issues where we believe adjustment is necessary are as follows:-

  Start Date: The Parliamentary Ombudsman found that the start date for maladministration was July 1991, but for spurious reasons of his own Sir John Chadwick chose to delay this effectively to December 1992. This enabled him to duck the problem that full information is not available for that period. As a result, no attempt has been made to reconstruct this information. We believe such an attempt could be made and Towers Watson could certainly estimate the amount involved from the information which they have. In EMAG's view this would increase the aggregate 'relative loss' by about £700 million.

  Work in Progress: Towers Watson in July gave you a range of between £4 & £4.8 billion. Our assessment is that they have calculated £4.8 billion as being the relevant loss up to 31 December 2007, but they believe that by incorporating data for the next 2 years they can reduce the aggregate by £800 million. While we believe there may be some reduction in the 'relative loss' applicable to those who were still invested in Equitable Life at December 2007, we cannot see it that could possibly amount to £800 million. In any event, it is time that Towers Watson finalised this estimate so that Ministers can make a decision based on a more reliable number.

  Exit Costs: Over the years following the Society's closure, something in excess of 2/3rds of policy holders by value moved their money elsewhere. The vast majority of these did so to protect themselves from future losses and / or to escape Equitable Life, which was no longer capable of operating as a with profit office. Many of these suffered substantial exit costs, which should form part of their 'relative loss'. However, the methodology which Towers Watson has used assumes that anyone who left Equitable Life during that period upon a non contractual basis would also have left the comparator company on the same basis. Of course, if investment had been made in the comparator no such non-contractual exit would have been necessary. This has the effect of eliminating exit costs from the aggregate of 'relative loss'. They should be re-instated.

  Policies in Existence Before the commencement of maladministration: Chadwick ducked this issue by calculating losses based upon his reconstructed version of Equitable Life. Since its results were, according to him, almost identical to the Society's actual performance, the effect is to value these losses at nil, or in some cases as profits. It is entirely possible to make an appropriate addition for such policies, but Towers Watson need to address it as a matter of urgency.

  With-Profit Annuities: The information provided in respect of with profit annuities is entirely inadequate, but the result seems to produce losses which are proportionate to those suffered by other policy holders. This strikes us as very likely to be inadequate. In any event, we do not believe that it is appropriate, in circumstances where almost all the industry only offered conventional annuities, to use the Prudential and Scottish Widows with profit annuities as the comparator. In our view, the appropriate comparator for the vast majority of Equitable Life with profit annuities (average investment of about £47,000) is a conventional fixed annuity.

  Conclusion: We are sorry to note that you did not act upon the request contained in our letter of 3rd September to 're-commission Towers Watson to recalculate 'relative loss' unfettered by Chadwick's template'.

  In our view, the Towers Watson's Stage 2 estimate provides a sound starting point for the proper calculation of 'relative loss' as recommended by the Parliamentary Ombudsman and Towers Watson are capable of making the necessary estimates to correct the deficiencies referred to above and produce a reliable figure upon with Ministers could make a decision. There is just time for you to issue the necessary instructions so that they can do so."

  Letter to minister Mark Hoban from EMAG director Colin Slater, 8 October 2010

• "It is worth remembering a further aspect of the Ombudsman's recommendation which we should not lose sight of. In her report the Ombudsman said:

  'that the public purse interest is a relevant consideration and that it is appropriate to consider the potential impact on the public purse of any payment of compensation in this case.'

   

  She also noted that implementing her recommendations for a compensation scheme 'might entail opportunity costs elsewhere through the diversion of resources'.

  Members will recognise that this is going to be an especially tight Spending Review across Government and public services and will therefore be keeping this recommendation from the Ombudsman recommendation in mind when considering the settlement of the Equitable Life issue.

  Like you, I personally want to see a swift end to the plight of Equitable Life policyholders.  I trust you will take comfort in the knowledge that I am doing all that I can to resolve the matter as quickly as possible."

  Extract from letter from Mark Hoban MP, Financial Secretary to the Treasury, to MPs 28 September 2010

  By way of a rebuttal, an EMAG member writes...

  "Hello Paul,

  You tell us how Hoban reminds MPs of the PO's caveat that, 'the public purse is a relevant consideration'.

  Hoban should also admit the fact that 'the public purse' has had the benefit of ten years interest-free use of the £5 billion that Gordon Brown MP (when Chancellor) estimated would be needed to save Equitable Life (in 2001).  This amount is very close to the amount referred to by the PO as the possible total compensation to ELAS policyholders, but remains an amount so far unadmitted by Hoban and his ilk.

  During those ten years, the Equitable's victims have subsidised 'the public purse', both by Governments determined to withhold compensation and so use the money for their own policies, and by the lack of any interest paid on that money.  Quite what £5 billion in 2001 would be today, I can only speculate.
  Now, when compensation is paid,  

  1. its buying power will have been savagely reduced by ten years of inflation 
  2. ELAS victims have been denied the opportunity to use or invest their money for growth and for their benefit 
  3. living standards have been greatly diminished by the falling incomes (38% in my case)
  4. a very large number of victims have died and left their families in straitened circumstances
    Surely, all of the above can justifiably be presented as a pre-emptive and enforced ten-year contribution towards cutting the deficit?

  We all paid in advance. Regards, B**** ******* "

• "Several honourable members have suggested today that the Equitable Life scandal - and a scandal it was - is complicated, but for me it is actually quite simple. It is about fairness to a group of people who were badly let down by the regulatory failures of their Government. I went into the recent general election supporting a Conservative manifesto that made a promise to Equitable Life policyholders in my constituency...

  I wish to take this opportunity to assure policyholders in my constituency that I for one do not intend to go back on that election pledge. Most people accept that Equitable Life policyholders were the subject of Government maladministration, and that is certainly the view of the ombudsman, Ann Abraham. There is some dispute on all sides, however, about the level of compensation that should be paid to policyholders.

  Sir John Chadwick's report established that the relative loss suffered by Equitable Life amounted to between £4 billion and £4.8 billion, and the Financial Secretary, in his statement to the House this July, supported that figure. However, Sir John then used a series of convoluted calculations and speculative assumptions that allowed him to suggest a cap on the total amount of compensation that should be paid. He then went on to reduce that cap figure to just 10% of the 'relative loss' figure that he himself originally calculated.

  One of Sir John's most telling assumptions was that the majority of policyholders would have invested in Equitable Life irrespective of maladministration. That is a very big assumption that cannot be proved or disproved, but any rational person would consider such a lemming-like approach by investors as highly unlikely. I am simply not convinced by Sir John's arguments and I dismiss them out of hand, as do the Equitable Life policyholders in my constituency.

  Like many members, I have been in touch with many of those policyholders, and all they want is fairness, because they are fair-minded people. However, they are not stupid people, and they recognise that in these times of austerity even they must shoulder some of the burden needed to bring down the country's massive debt mountain. To ask them to accept a reduction of 90% in their compensation, however, is not only unfair but, as has been mentioned by other Members, immoral.

  In the current economic climate, however, it would be right and proper to ask Equitable Life policyholders to accept a cut in compensation in line with those being proposed for Whitehall Departments. If departmental budgets are cut by 20 or 25%, as we are being led to believe, I am willing to support a similar reduction in the assumed total of Equitable Life's relative loss, which would mean a compensation package of between £3.6 billion and £3.8 billion. If anything other than a formula based on a figure in that region is proposed, I will be forced to vote against the Government when the figure for compensation is debated."

  Gordon Henderson, Conservative MP for Sittinbourne and Sheppey - in the Commons debate on the second reading of the Equitable Life Payments Bill, 14 September, 2010

• Equitable Life's Chris Wiscarson furious over Treasury letters.

  Chris Wiscarson, the chief executive of Equitable Life, has branded as 'outrageous' attempts by Mark Hoban, the Financial Secretary to the Treasury, and a roster of other Conservative MPs, to undermine the £4bn-£4.8bn compensation he believes the insurance company’s policyholders should be receiving.

  Two days ahead of a parliamentary debate on the decade-long compensation scandal, Mr Wiscarson called on Mr Hoban to 'do the right thing' by giving Equitable’s thousands of out-of-pocket policy holders adequate compensation.

  Ahead of the debate, Mr Wiscarson, in some of his most robust comments to date, told The Sunday Telegraph that politicians should stop 'making up' compensation amounts. A letter sent by Mr Hoban to a number of parliamentary colleagues makes no reference to the £4bn-£4.8bn figure that was first suggested by Ann Abraham, the Parliamentary Ombudsman, in July 2008.

  The letter from Mr Hoban, a copy of which has been seen by this newspaper, does, however, make considerable reference to a report by Sir John Chadwick, who in July found that the amount of loss was in the region of £400m-£500m. Ms Abraham, has described Sir John’s report as 'unsafe and unsound'...

  It can be revealed that the basis for these MP’s letters – many of which are remarkably similar — came from a series of draft documents produced by the Parliamentary Resource Unit (PRU). The PRU, based in the House of Commons, is a non-profit briefing and research service which supports 270 Conservative MPs. It is run by Iain Corby, who cleared the Equitable Life 'standard letter' memo sent to MPs in August 2010. On its own website, the PRU notes that the standard letters it produces 'incorporate the latest thinking of the member’s party on the issue. These positions are again sourced from the appropriate front-bench teams or party political sources, not within the Unit.' ...

  Mr Wiscarson said:

  'A policyholder reading this would be thinking this is the direction the Government are going in,' he said. MPs ought to have 'all the appropriate information' before them ahead of the debate this week and the Government should base its decision on the ₤£4bn-£4.8bn range. He added that Sir John Chadwick’s numbers 'have no place in this'...

  Sunday Telegraph, by James Quinn 12 September, 2010

• "MPs under fire in Equitable Life row.

  Coalition MPs were last night accused of kow–towing to the Treasury after it emerged they have been sending carbon–copy letters to equitable life policyholders, fobbing off constituents who lost billions when the mutual insurer nearly collapsed a decade ago.

  In a damning claim, Equitable Life chief executive Chris Wiscarson also accused the coalition government of implicitly supporting Sir John Chadwick's July report which recommended a meagre £400million–£500million payout to equitable policyholders.

  'It is clear to me that MPs are being briefed to support the Chadwick report,' said Wiscarson.

  Parliamentary Ombudsman Ann Abraham called the Chadwick report 'unsafe and unsound', and estimated a more reasonable payout should be based on losses of £4billion–£4.8billion. Yesterday, equitable life called on the Government to implement Abraham's recommendations in full.

  Policyholders now fear that the coalition government, which came to power promising to adhere to the Parliamentary Ombudsman's recommendations, will offer a payout of as little as £400million.

  Hundreds of letters sent to equitable policyholders by coalition MPs are very similar. Sometimes – as in the case of letters sent by Conservatives David Nuttall, MP for Bury North, and Mike Freer, MP for Finchley and Golders Green – they appear to follow a standard script. Their wording is almost identical.

  'It appears that a standard template has been provided to MPs to send on to policyholders,' said Wiscarson. On other occasions the script deviates slightly. But in every case, coalition MPs highlight the importance of the Chadwick report at the expense of the ombudsman's findings.

  In a letter sent by Nuttall, the Bury MP states that a figure of £600million is 'support[ed]' by Equitable Members Action Group (EMAG), a pressure group set up to support policyholders.

  EMAG spokesman Paul Braithwaite denied any connection with the figure and accused the Treasury of talking up the Chadwick report in an attempt to cut financial exposure to final compensation claims.

  'The Treasury have been unbelievably devious,' said Braithwaite, accusing the coalition of reneging on pre–election promises after realising that compensation costs, in an era of supposed fiscal austerity, could rise to nearly £5billion. 'It is as if there hasn't been a change of government.' EMAG is set to make its case to financial secretary to the Treasury Mark Hoban today.

  MPs will debate the Equitable Life (Payments) Bill next Tuesday in Parliament; a final compensation sum will be announced on October 20.

  Daily Mail, Elliot Wilson 7 September 2010

• "EMAG seeks support ahead of debate;

  Equitable Life policyholders are being urged to lobby their MPs to back fairer compensation for victims of the failed insurer, ahead of a crucial House of Commons debate in September.

  MPs will hear the second reading of the Equitable Life Payments Bill on 14 September and campaigners have expressed concern that the Treasury will ignore a letter from the Parliamentary Ombudsman in July which said the recommended compensation payments were 'unsafe' and 'unsound'.

  Paul Braithwaite, spokesman for the Equitable Life Members Action Group, said:

  'We are more than frustrated that whereas Sir John Chadwick was given an extension for his report, we have been asked through August, through a bank holiday, to make a submission to the Treasury on what we proposes as an alternative scheme. We will make a submission. We will be informing MPs in advance of the debate and encouraging them to participate.'

  The House of Commons published a report on the history surrounding compensation payments for the collapse of Equitable Life ahead of a reading of the bill, which will provide the authority for a payments scheme for eligible former and current policyholders.

  The 55-page document said:

  'This paper outlines the commercial problems of Equitable Life, the series of investigations into the regulation of its activities and the work of the office of Sir John Chadwick in devising principles for designing a workable system of payments.'

  Mr Braithwaite added:

  'We are appalled that the Treasury is seemingly bent on toughing it out. The paper seems grounded in the Chadwick report and given the ombudsman’s view that Chadwick is unsound, this must be torn up.'

  Sir John Chadwick's report, published in July, recommended that policyholders should receive £400m compensation. His conclusions were rebutted by Ann Abraham, parliamentary ombudsman.

  She told MPs:

  'It seems to me that those proposals, if acted upon, would not in any sense enable fair and transparent compensation to be delivered.'

  Mark Hoban, financial secretary to the Treasury, has de-scribed the Chadwick report as 'just one of the building blocks in resolving what is a complex matter'. He is expected to set out the funding for compensation at the government’s spending review on 20 October.

  The government has also set up an independent commission to advise on the best way to allocate payments to policyholders and help to develop the design of the scheme. It will report back by January 2011."

  FinancialAdviser , by Marc Shoffman Aug 26, 2010