Bulletin No 1  27^th March 2004 

From      Peter Butler

Email      pdbutler@ntlworld.com

Tel.         020 8466 6446

1.   AN OFFER HAS BEEN  MADE

One of our group has received an offer. He started his WP annuity in 1998 and is being offered an additional supplementary level annuity valued at approx one third of his starting annuity. The offer was made without supporting computation and this is has been requested and will be supplied.

 

The Offer is described as “…..a supplementary annuity representing the difference in value at the time you retired between your with-profits annuity and a GAR annuity.” This was worked out by comparing the value of the GAR annuity that should have been available– with a fund where we used the differential higher bonus- with the value at retirement of the with profits fund that you bought with the same fund.

ELAS have asked for “Acceptance” of the offer within 28 days but acknowledged that the 28 days will only be from the time they have clarified the computation’

 

It is questionable whether “Acceptance” here is a contractual or merely a procedural term, because the House of Lords Decision makes Rectification of the wrong bonus levels mandatory (in the relevant cases) and not a negotiable benefit.

 

Hopefully further computation data will assist our finding an understandable model for other offers.

 

2.  THE VALIDITY OF THE REVISED RECTIFICATION SCHEME (2003)

Within our group (now 50 on the register) there is a general feeling that this revised scheme is inadequate. This view is shared by Stuart Bayliss of Annuity Direct as described in the following letter which he sent to a member of our group and also to other Equitable Action Groups.  

Equitable Life

A number of people have contacted us recently with regard to the Equitable Life Rectification Scheme. 

The Scheme resulted from the House of Lords’ decision and was designed to put Equitable Life GAR policyholders in the position they would have been had they been informed of the rights, opportunities and value of their GAR policies when they had taken their benefits.  It was to be applied to all those who had taken benefits from GAR policies between 1993 and July 2000.  The Scheme quickly ran into trouble and has been in a process of turmoil or reform ever since its initial announcement in November 2000.   

It is now clear that, in an attempt to minimise the cost of the Rectification Scheme, Equitable have moved the balance of responsibility for proving eligibility for the Scheme almost completely on to the policyholder.  They seem to be relying on standard letters and an unrealistic set of assumptions about the sales process. It is proving very difficult to proceed and, in general, everybody who has a genuine belief that they would have taken a GAR benefit is likely to end up taking their case to the Independent Assessor. 

 

The latest review of the rules has recently been circulated.  This makes an attempt at explaining the narrowness of the Scheme.  The process of making a claim is now substantially different from that originally envisaged.  It is important that a fair judgment is made as to whether the Scheme now meets the objectives intended by the House of Lords.  

The Court case was initiated by the then Board of Equitable and therefore I believe it is their responsibility to ensure that any subsequent re‑interpretation of the House of Lords’ decision is reviewed from the perspective of both sides.  This review has not taken place with the new Rectification Scheme proposals.  A fair way of conducting such a review would be to engage the legal team that represented the policyholders in the House of Lords’ decision.

The expense of this compared with the ongoing enquiries with the Independent Assessor and the desperate feelings of frustration and unfairness felt by policyholders can be balanced and the legal review is likely to prove more cost effective.

There can be no outright winners from the Equitable debacle but the comparative burden of loss in the new Rectification Scheme is not what was envisaged in my view by the House of Lords’ decision.

3.   ACTION REQUIRED

It is now time to consider setting up a small Working Party (possibly in the London area for practical purposes) to review possible action options. I welcome further thoughts on this suggestion and would be delighted to hear if anyone in our group has useful experience in law, accountancy, financial services and general number crunching. The suggested Purpose will be

“To consider what action is possible to ensure that Annuitants who are deemed to be within the scope of the Rectification Scheme should receive the maximum entitlement due to them arising from the House of Lords’ Judgement”

The Issues to be resolved are

• WHAT IS BEING OFFERED NOW ?

Entitlement to missing bonus under the New Bonus Resolution is being converted into a supplementary level annuity backdated to the commencement of the main annuity, plus a lump sum in back payment

• WAS ELAS RIGHT IN DITCHING THE ORIGINAL SCHEME?  

I am still awaiting the personal details from some colleagues. The items requested were

Please let me have the details of offers that you receive meantime.

Peter Butler