EQUITABLE LIFE MEMBERS
Clarity and Parity - Page 1
The fall of Royalty Life
by James Biggs
ex Equitable Life employee)
– 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.
So I don’t really need one of your very
smart reps to call in on me then?
No. But if you wanted one to call in Mr Nash it would be no
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.
Perfect Mr Nash. Thank you.
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.
January 17th 1993, 11.30 am.
– 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.
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.
Thing is though, his letter says he is going to seek legal advice.
And go to the Ombudsman. And the Regulator.
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.
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.
And I’m the king of Peru. Give me that letter.
the letter and starts to write on it
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!
22nd May 1993, 10.30 am.
– 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.
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?
of fifteen attendees only three raise their hands.
you three and me only. Treadon, could you cover the history for the
benefit of everyone?
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.
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?
It’s a guarantee, so we have to pay don’t we?
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.
But what if lots of people ask and annuity rates do not go up?
You actuaries always ruin the party. What if, what if? You tell me,
if we pay more, where does it come from?
The With Profits fund.
Which means what to everyone else?
Maybe they will get less.
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!
So what do we do with Mr Green and others like him?
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?
27th January 1997, 10.15 am.
– 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.
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.
sees one of the papers with “Royalty Life” written on it.
that looks like one of the originals issued in the fifties. Can I have a
Yes. It still has some old wax on it where the seal was.
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.
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.
Really! So why haven’t you? You’ve not signed up here yet. You
must chase it surely.
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.
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.
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.
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.
– 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
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.
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.
(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.
scene fades as a trainer addresses them from the front of the class.
14th August 1997, 11.00 am.
– 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
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
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?
Inheritance tax. What happens to the life cover if we die?
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.
What does that mean.
Dead simple. Either of you dies, the policy pays out to the
survivor or the kids if both are dead.
Bloody funny name for it. Why married woman’s property doodah?
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.
Crikey. (He pauses) Shame they changed it really.