EQUITABLE LIFE MEMBERS
FSA MEETING 10 October 2001
Action Group meeting with the FSA 10 October 2001.
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)
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.
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
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.
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
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.
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 email@example.com
Paul Braithwaite firstname.lastname@example.org
With thanks to Martin Roberts of the FSA for checking this