Action Groups

Paul Braithwaite – Chairman EMAG

Stuart Bayliss – Annuity Direct

Geoffrey Glover – Income Drawdown Group

Liz Kwantes – Equitable Life Members Help Group

Nicholas Oglethorpe – With Profits Annuitants Group

(Apologies Ron Bullen – Chairman EPHAG)

FSA

John Tiner

Martin Roberts

Steve Walton

1. Introduction

Introductions were made, John Tiner who joined the FSA on 4 June to take over as one of the three Managing Directors that will be running the FSA for the consolidation of financial services into one authority in November, gave a short resumé of his background with Arthur Anderson and the Barings Bank Project with which he had been involved.

Comments were made on the reaction of IFAs in that they were holding back from giving advice to policyholders when they most needed it. The FSA explained that after the December 2000 announcement they were concerned that some IFAs may act irresponsibly and had decided toremind IFAs of the need to follow established rules when dealing with Equitable policyholders to discourage any inappropriate behaviour. It appeared that IFAs had subsequently been reluctant to advise and this was clearly to the detriment of the policyholders.

2. FSA Report

The first question asked was when the FSA report (produced by Baird) that was commissioned by the FSA Board would be ready. John Tiner confirmed that the report was now complete and had been sent to the Treasury in the last day or two.

A short discussion was held on the implications of the Martin Robert’s letter of 18 December 1998. There appeared to be some discrepancy on dates and the actual meaning implied in the letter, although it wad felt that this had been thoughtfully prepared. The intention of the letter was to inform all life offices of the Treasury’s consideration of the GAR situation. It had not been written as an endorsement of Equitable’s operations, although the Equitable may have seen, or represented, it as such.

3. Income Drawdown

Geoffrey Glover explained that the Income Drawdown Group had realised that their best move would be to exit the Society as a group and had been in contact with three major providers, The Halifax, Prudential and Standard Life at Board level. He said that over one weekend in August all three suddenly withdrew their interest. The FSA were unable to give any reason for this happening.

4. With Profit Annuitants

The situation of the with profit annuitants was discussed. It was suggested that since both Norwich Union and the Prudential had introduced more flexible allowances for annuities within their funds that this should be allowable to Equitable too. This had been discussed in meetings with the Board. The FSA felt that this would be quite reasonable, if the Board felt that this is the way they wished to go. The possibility of transferring to another provider was discussed although a change in statute would be required for this and would therefore need to be backed by government. Although at the meeting with the Treasury Ruth Kelly MP had seemed to look favourably upon this.

Having the with profit annuitants as a separate class for the compromise deal was also touched upon. Vanni Treves had mentioned at the first meeting between the action groups and the Board that he was considering offering representation for the with profits annuitants although this has not been raised by him since.

5. Current Administrative Status Within Equitable

Grave concern by all the action groups was put forward to the FSA concerning the problems of administration within Equitable. This has been a complaint for some time now. The FSA said it was aware of the problem. That there was no quick fix, but that it was monitoring the position closely and working with the Society to improve the position in the longer term. The possibility of the FSA putting someone inside the Equitable was put forward. John Tiner stated that currently their role was one of monitoring, but their remit could be enhanced with N2 and this may be a possibility in the future. John Tiner felt that current executive management were doing a good job under the circumstances. The action groups pointed out that it appeared information was not being made available to the Board as it should be and that this was severely hampering the running of the organisation.

6. The case of a No Vote

In his absence Ron Bullen had asked for the question to be put forward, ‘What would the FSA do in the case of a NO vote’. John Tiner discussed the scenario of provisional liquidation .The liquidator would look for other providers to take the fund over, although he felt that this would probably not be satisfactory as no one would be prepared to take the fund as it stood due to the instability. As an alternative the provisional liquidator could seek to promote a scheme of arrangement, although there seemed no reason to suppose that this would be preferable to one promoted by the current Board (and would, in any case, come to late to secure the Halifax money). Alternatively it might be possible to apply to the court to reduce the liabilities to policyholders (guaranteed as well as non-guaranteed) if this was likely to be preferable to a full liquidation which would involve substantial costs and adverse tax consequences. Even in provisional liquidation there would be likely to be a serious interruption in the running of the company. This would be particularly difficult for annuitants and he backed Charles Thomson and Vanni Treves’ warning that it could take months for the annuitants to be paid. It was agreed that this would not be in the interests of the government, particularly with their stakeholder programme, but it was not easy to see what alternative would be available.

Liz Kwantes liz@kwantes.com

Paul Braithwaite emagpr@yahoo.com

With thanks to Martin Roberts of the FSA for checking this