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ELTA
– The Reason Why
ELTA was
set up in 2003 as I considered at the time and as time has
proved the With-Profits Annuitants (WPAs) of Equitable Life
were let down by the Regulator for the following reasons.
1.
The purpose of compulsory annuity purchase is to require
individuals to secure a safe and reliable income for
retirement when, crucially, they will be unable to supplement
their income from alternative sources. Since this is a key
statutory requirement that an individual MUST buy an annuity,
it follows that the regulating authorities have an absolute
obligation to ensure that the products offered on the market
can meet that statutory objective. Any failure to do so must
inevitably result in a justified claim for mal-administration.
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2.
The With-Profits annuity (“WPA”) was a particularly complex financial
product, poorly understood by the annuitants who purchased it and many of
Equitable’s representatives who sold it. It was predicated on the belief
that the Equitable Life Assurance Society was a properly regulated, blue
chip, institution of sound financial standing. Annuitants would not have
purchased the product had they believed otherwise. More than any other
product the Equitable’s finances were key. Without its apparent
financial strength, the product could not have been sold
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ABOUT
ELTA
Welcome to ELTA, which is
dedicated exclusively to work for ALL of the With Profits
Annuitants of Equitable Life, now with the Prudential,
and who are members of ELTA and all those who are not,
but hopefully who will also benefit from our work.
ELTA is part of E7, which
consists of the seven Equitable action groups who have all
combined in their fight for government compensation.
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ELTA has an advisory
committee which at present include:
Richard
Griffiths
Steven
Pearl
Roy
England
John
London
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The co-ordinator of this
committee is Peter Scawen.
If you would like more
information, to join ELTA or wish to contact him you can do so
at:
00 33 5
56 71 96 47
La
Levaille
33220 Caplong
France
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3.
Three core issues
differentiate with-profits annuitants:
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a. |
Their
inability to surrender the policy or transfer it to another
provider; |
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b. |
The
importance of the purchase in the context of providing a safe and
reliable income, when the individual’s abilities to find
replacement income were increasingly remote; and |
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c. |
The
increase of their losses as they get older because of the central
role of the increasing, but un-guaranteed terminal bonus that was
required to maintain their retirement income. |
4.
The WPA was
deeply flawed as a source of retirement income. Probably it could never
have delivered what it promised. The risk annuitants were invited to
accept was the risk of the market, hedged by Equitable’s (allegedly)
superior financial management and adequate reserves to support a smoothing
policy. In fact there were no reserves to cover terminal bonus policy, no
smoothing policy and Equitable was managed incompetently.
The ever-increasing gap between the “guaranteed” annuity and the total
annuity was not covered by reserves, nor did it feature as a liability in
the accounts and statutory returns. It could therefore only be met either
by an ever increasing sales effort, so that new investments were required
to meet the obligations of the old, or, as occurred from November 2002, by
not paying it. In effect, Equitable created a pyramid scheme.
5.
There was a
significant failure of regulation. It was the responsibility of the
regulator to ensure that the products on the market were in fact capable
of delivering what they were offering, since annuitants are reliant on the
regulator to carry out the sort of tests that lie beyond the competence of
the general public.
6
The
Ombudsman’s three critical findings that the information on financial
standing was incomplete, that liabilities were understated, and that the
solvency position was not appropriately verified leading to a misleading
picture of the financial health of Equitable, mean that the clear
injustice sustained by With-Profits Annuitants was the purchase of a
product, which, without this mal-administration, they would not have
purchased.
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