Equitable Life Assurance Society And Its Handling of With-Profits Annuities
PRESS RELEASE - 27
August 2003 embargo until 11.00pm
REPORT: Equitable Life With-Profits Annuities cost pensioners billions!
of trapped Equitable Life pensioners were drawn into investing in the stricken
company with promises that ultimately could not be met and has cost them
billions in lost income, according to a new report published today.
Some of the pensioners
have had their Equitable With-Profits Annuities slashed by nearly 30% - far more
than the 20% the company claimed when it announced cuts last year and with the
probability of more cuts next year.
One of the trapped
With-Profits annuitants, Peter Scawen, asked other Equitable annuitants to
supply him with detailed information about their reductions and has now written
a report into how the annuities originally offered by Equitable were
to Mr Scawen, the Equitable With-Profits Annuity system, introduced in 1988, was
designed to draw in investors by offering very
attractive benefits but with high downside risks that were not clearly
identified. These included a "bonus" element that appeared to
be assigned to the annuitants, but in reality could be, and has been, withdrawn by the Society at a moment’s
has had to reduce the benefits of these annuities twice: in 1996 as market
conditions changed when they withdrew the GIR annuities and replaced them with a
lower performing variant; and in 2002 when they imposed draconian cuts in the
annuity payments to all With-Profits Annuitants. These cuts in particular were
necessary to meet the obligations of the Society to the GAR policyholders
following the adjudication of the House of Lords in their favour. Arguably these
obligations were achieved by penalising the With-Profits Annuitants whose
policies appear to have been tailor-made for such a situation.
With-Profits Annuity system was outlined to the Institute of Actuaries in 1988 by the then Equitable Chief Executive of the Society, Roy
Ranson, in a paper entitled “With Profits Without Mystery”. The members of
the Institute pointed out the serious
flaws and weaknesses of the system and the
potential of financial collapse of the company in the event of a fall in
equity values or interest rates or some other contingency as the Society would
not have in effect any reserves.
actuaries employed by the government regulator, which was the DTI at the time,
cannot have been unaware of both the presentation to the Institute and the
reaction of its members and yet no
action was taken then or now” said Peter Scawen. “How did this deeply
flawed system ever get the approval of the government regulators?” he demands
added that the Society’s With-Profits Annuitants were effectively denied their
legal rights by the Compromise scheme. “We are being used by the Society to underwrite its financial woes. I believe that this infringes “Policyholders’
Reasonable Expectations” and arguably our common law rights.”
The report can be seen
at a new website for Equitable Life Trapped Annuitants’ - www.elta.org.uk
For further information please contact:
Peter Scawen on
00 33 5 45 98 32
08 or at PSCAWEN@aol.com.