Clarity and Parity - Page 1



The fall of Royalty Life

by James Biggs

(an ex Equitable Life employee)

Scene – A rural village street. Leafy and attractive. The scene focuses on a semi-detached cottage. Inside by the front door a man is on the phone. He is Donald Nash. Age 55, dressed in blue and green and wearing tartan fur-look slippers. He is heavy set with red cheeks and large ginger sideburns. He has a Devon twang on his voice. On the phone the voice of a young and officious female clerk is responding. 

Nash    So I don’t really need one of your very smart reps to call in on me then?

Clerk     No. But if you wanted one to call in Mr Nash it would be no problem.

Nash     I’m sure that won’t be necessary. My pension has been running for years. It’s easy really. I spend 364 days of the year working as a taxi driver in Exeter and on my day off I sit with my accountant and work out how much I have earnt. Then I decide how much to pay to Royalty Life and I send a cheque. Honestly, your policies are so flexible I love them. I’ll just pop a cheque for £5,000 in the post then.

Clerk     Perfect Mr Nash. Thank you.

Nash     No thank you. My With Profits fund just keeps getting bigger and bigger. It really is very impressive that you pay out more than any other company. I’m amazed you can keep it up to be honest, but I’m not complaining. I can’t wait to get my hands on it when I retire in five and a half years. I really can’t wait. Anyway, thank you my dear. My cheque will be there tomorrow.

Date: January 17th 1993, 11.30 am.

Scene – Starts way above a very impressive blue glass office which from the air is in the shape of an eagle. The building gets nearer and nearer until the view penetrates the blue glass and focuses within a corridor. Plush navy carpets, sky blue trimmings. Impressive art either side of large oak doors with official looking names on. Inside the last door, which has “Rich Cooper - Customer Complaints Manager” in gold on the nameplate, are two men in bold pinstripe suits. Rich Cooper is 42 with little hair. He has a thick moustache and a shiny head.  

Cooper    Who does this bloke think he is? When we tell a customer how much income their pension is going to give them, that is it. It’s not like that film, Oliver. (Whining voice) “Please sir, can I have some more”. Well NO as a matter of fact. You bloody well can’t, to be blunt.

Clerk     Thing is though, his letter says he is going to seek legal advice. And go to the Ombudsman. And the Regulator.

Cooper    We do NOT give people more than the current annuity rate will allow. End of story. If he doesn’t like it, he can shop around and go elsewhere. But everyone knows we are the best. I mean, what did he want when he took his pension out? Some kind of guaranteed level of income at age 65. Any company agreeing to that would be getting an absolute pounding with recent annuity rate falls. No such contract exists.

Clerk     Well that’s the point really. He says in his letter that we did give a guarantee. He says it’s in his policy document.

Cooper    And I’m the king of Peru. Give me that letter.

Grabs the letter and starts to write on it

          Dear Mr Green, see you in court big nose! I’ll get this typed up and in the post today. Honestly, some people. Now leave me alone for a few hours. It’s my pay review tomorrow and I need to work on my pitch to get a massive bonus!

Date: 22nd May 1993, 10.30 am.

Scene – A very plush boardroom. Circular oak table surrounded by 20 ox-blood red leather chairs. Pinstriped suits fill them all. Alan Dash is standing at the head of the table. He is stout but not fat. His jowls hang low. His hair is thick and oiled into a side parting. He is 55 but looks younger.

Dash      Ok. Next point on the agenda. Guaranteed Annuity Rates. I put this on after I received the following letter from an insurance barrister at Campbell McDermott. “Dear Mr Dash blah, blah, blah…retirement annuity policy…blah, blah, blah…Mr Green…only offered an income of £16,234 per annum… blah, blah, blah…guaranteed rate should be £16,979…very shabby response from your customer complaints manager…please settle in full or we will be forced to pursue the issue in court…blah, blah, blah…”. So. Hands up. Who knows what a guaranteed annuity rate is?

Out of fifteen attendees only three raise their hands.

Right, you three and me only. Treadon, could you cover the history for the benefit of everyone?

Treadon   Certainly. Introduced in 1954, the Retirement Annuity Policy was a pioneer in its time. For the first time ever, employees could start funding for their own retirement. We all now know these as Personal Pensions after a change in legislation in mid 1988. But the old policies set up since 1954 remained live. And within the policy contract, was a minimum income guarantee at normal retirement. But this only applies to With Profits policies.

Dash      Exactly. The guarantee would give approximately 10% of fund as an income. So why is this the first time we have had such a letter? Simple. The current market annuity rate up until now has been higher. So all the previous Mr Greens have actually got more than the guarantee. Problem is that the current annuity rate is now lower and has been for some months. So what do we do?

Zeller    It’s a guarantee, so we have to pay don’t we?

Dash      Yes. But this is only if the client knows and asks. This was a cheap marketing add-on in the fifties. Most people who have these policies don’t know they have a guarantee. Most advisers in the industry do not know they exist. The guarantee was never meant to bite. In my opinion, the terms of other types of annuities are better and anyway, the annuity rate is bound to go up again. It is likely to be an issue for only a small handful of clients.

Treadon   But what if lots of people ask and annuity rates do not go up?

Dash      You actuaries always ruin the party. What if, what if? You tell me, if we pay more, where does it come from?

Treadon   The With Profits fund.

Dash      Which means what to everyone else?

Treadon   Maybe they will get less.

Dash      How good does that make us look? Think about it. Our monumental success these last fifteen years has been on the back of that With Profits fund. You know that we tiptoe along the edge of minimal reserves so that we can pay out more. This makes Zeller’s task of getting his reps to sell tons of policies much easier. Challenge that and we challenge our ability to go on. It could be the end!

Treadon   So what do we do with Mr Green and others like him?

Dash      We pay at the guaranteed rate. We keep it quiet. We get Customer Services to deal with each case. We let Rich Cooper manage it. We’ve just paid him a top bonus so he’d better do it well. Annuity rates go back up. It goes away. Anyone any objections to this approach?

Date: 27th January 1997, 10.15 am.

Scene – Dingy, musty looking office. Glass fronted interview room. Donald Nash sits opposite a large sweaty man in a brown suit. His name is Ray Carliss and he has gelled brown hair and pock marked skin.

Carliss   So Mr Nash, I’m glad you are in London this week. It is very nice to see you again. You have your policy documents to hand I see. We have a little bit of form filling to do then we should start your annuity payments next month. We pay on the first calendar day of each month.

He sees one of the papers with “Royalty Life” written on it.

Gosh, that looks like one of the originals issued in the fifties. Can I have a look?

Mr Nash   Yes. It still has some old wax on it where the seal was.

Carliss   The bad old days loom large in this document. Legalese, tables, charts. All sorts of stuff in here that would never comply with our drive for plain English today. They have even got these old annuity rates in the back. My God, if only such rates were available today. Do you know Mr Black, due to the fall in interest rates and the increase in life expectancy figures, annuity rates today are lower than ever. Back in 1993 I remember when such a plan could yield you over 10%. Sadly, it is only now barely above 7%. But just look at these old percentages. Male aged 62, guaranteed rate…10.75%. Shame you can’t have that.

Mr Nash   More than a shame. It’s a scandal. My old pal had a similar table and he kicked up a fuss so they paid him more.

Carliss   Really! So why haven’t you? You’ve not signed up here yet. You must chase it surely.

Mr Nash   Well I rang my branch in Taunton and the adviser said that he’d never heard of guaranteed annuity rates and that if they existed then he was the king of Peru. I complained to the manager but his response was the same. Look, I’m never lucky. I’m just a plain old taxi driver who has had enough and wants to retire. I had a moan. I lost. I just want to get on with drawing my pension. My wife is very unwell and I want her to enjoy the money now. And I reckon your recommendation is the best. I mean you are independent and a specialist after all.

Careless  Correct, Mr Nash, but this is a one off decision. If we act now and make the wrong decision it is irreversible. We must find out what your friend did to make them shift. Can I make a phone call on your behalf?

           He reaches for a phone. 

Half an hour later, as Mr Nash leaves the building, Carliss trots back to his desk. He attempts to click his heels but trips over a bin and bangs his knee on the desk. Furtively looks around to see who may have seen his display. Straightens his hair and wipes sweat from his face.

Carliss   Jenny, call that mate of yours who works for the Chronicle will you? I need to speak to him right now. Also, get me a list of all the customers we have between 55 and 70 and have policies with Royalty Life. Jesus, this is it. I’m going to be a hero. I’m going to be famous. I hate that company and I am going to bring it down. Never pay commission? Pay bloody shedloads more like!Date: 20th June 1997, 8.45 am.

Scene – Classroom environment. Lots of freshly recruited and keen reps on their first day at Royalty Life’s very expensive training centre. A very slick, oily looking and smooth pinstriper is on his feet. He has a grin that seems false but his teeth shine like Tony Curtis’s in “Monte Carlo or Bust”. He is David Maymes, head of Marketing. He struts like a military commander and stands like he is smuggling an ironing board down his back. His black hair, expensive suit and hand made Italian shoes are immaculate.

Maymes    So enough about me. You know why you are here. But let me conclude. You’ve made it. Well done. Look around you. The people with you in this room will soon be earning in excess of £100,000 a year. Look at the success. Taste it. Join in. Royalty Life is in a class of its own. The customers know we don’t pay commission to brokers. They know we have the best policy returns. They know we have the most flexible contracts and the lowest charges. Some of them might even know that the average salary per rep is in excess of £75,000 but they don’t care. They are the customers every insurance company would kill for. Doctors, dentists, solicitors, accountants, company directors. They love us. We provide the group pensions for 30% of the top 100 companies in the UK. We also have the pension top-up contracts with the House of Commons, the House of Lords, the Judiciary, the Police, the NHS. We are virtually untouchable. We work hard and we play hard. So do our customers. They are very wealthy. And they are greedy, that is why they keep putting more and more money in our With Profits policies. It seems too good to be true. Well take a look around. IT IS TRUE! The more we sell, the more we sell, the more we sell. Ladies and gentlemen, pat yourselves on the back. You have arrived.

He pauses dramatically and runs his forefinger along his left eyebrow slowly 

Thank you for your attention, now I would like to hand over to my excellent training team.

Briggs    (Whispering to a colleague next to him) This is it. The job I’ve been waiting for. This is the racing car of insurance companies. Well keep the engine running, there’s a new driver in town and his boots need filling. Just need to get myself the inside knowledge and one of those really swanky pinstripe jobs.

           The scene fades as a trainer addresses them from the front of the class. 

Date: 14th August 1997, 11.00 am.

Scene – A very large, very detached, very expensive Victorian house in Barnes. In the living room are two totally sloaney-clad thirty somethings and Briggs in a ridiculously pronounced chalk-stripe suit. Briggs has a round face and short tidy blond hair parted at the side. He wears expensive glasses.  

Briggs    So let me just conclude. You’ve set up your own agency. As a result you urgently need to replace what you gave up when you left Boon and Boon, namely four times salary life cover each and some hefty pension contributions. Let me put some numbers on that.

He reaches for some official quote

For you Mike, that would mean £300,000 of life cover at a cost of £57.92 per month and a pension contribution into our executive plan of £800 per month. For you Christina, life cover of £200,000 at a premium of £29.98 per month and an exec pension contribution of £600 per month. Both areas fully covered, better contracts, seamless. Perfect. Any final questions before we fill in the forms?

Mike      Inheritance tax. What happens to the life cover if we die?

Briggs    Great question Mike. Thanks. I was coming on to it but I will cover it here. I am recommending that the policies are set up in trust under The Married Woman’s Property Act 1884. MWPA for short.

Christina  What does that mean.

Briggs    Dead simple. Either of you dies, the policy pays out to the survivor or the kids if both are dead.

Christina  Bloody funny name for it. Why married woman’s property doodah?

Briggs    It was part of an act passed by Parliament in 1884. This protected women. Prior to the act, if the wife died, all her property would become the husband’s. But if the husband died, the wife got nothing, not even the house. It all went to family.

Mike      Crikey. (He pauses) Shame they changed it really.

Christina     Excuse my husband. He tries and tries and tries. Sadly he just ends up being trying. That or a very unfunny arsehole.