EQUITABLE LIFE MEMBERS NORWICH MEETING 31 JANUARY 2003 Last Updated: Saturday, February 01, 2003 01:36 PM |
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EQUITABLE
LIFE SUFFERERS MEETING The
Assembly House, Theatre St., Norwich, Friday, 31st. January 2003 at
11.00 a.m. NOTES
for Editors. 1.
The collapse of Equitable Life, from 1762 the oldest mutual
life insurance company in the world, is a complicated story with just
TWO essential elements. A.
The Prudential supervisor (H.M.Treasury) let Equitable run
critically short of money.
NOTE. “Prudential” is not the
Insurance Co!! It just means “looking after solvency”. B.
The Government’s “Conduct of Business” (improper selling)
supervisor was the Securities and Investment Board which failed to do
its job. H.M.Treasury had the power to force it to perform or to
disband. It did not use that power. 2.
Explanation of A.
above. (i)
From the 1950s until 1988, and, for then existing policies
until 2001,
Equitable guaranteed high pension rates for which it made no
reserves. Members could add to their funds when they chose. (ii)
When interest rates went down from 1993, the guaranteed
pensions became valuable. (iii)
Equitable tried to cut bonus to people taking the guarantees.
The House of Lords in the Hyman case stopped this in July 2000. (iv)
The guarantees and their unquantifiable amount (payments in
could still be made by existing policy holders with returns miles
above market returns) meant that Equitable was unsaleable. It had to
close to new business in December, 2000. 3.
Explanation of B.
above. (i)
The Financial Services Act, 1986 allowed the Government to
delegate the supervision of “Conduct of Business” (improper
selling) in the financial services industry. (ii)
“Conduct of Business” was delegated to the Securities and
Investment Board. SIB had the power to regulate Self Regulating
Organisations, of which all providers had to be members. (iii)
Equitable joined the Life and Unit Trust Regulatory
Organisation (LAUTRO) which later merged with the Personal Investment
Authority (PIA). (iv)
Equitable engaged in mis-selling on a mass scale (See the
Opinion of Nicholas Warren QC) It concealed from thousands of new
buyers the existence of liabilities for which it had not provided. At
the same time Equitable did not give new policy holders the same
valuable guarantees. New buyers since 1988 now have to subsidise
guaranteed pension holders, but were not told of this risk when they
bought their policies. (v)
LAUTRO/PIA let this happen. The SIB did not ensure that LAUTRO/PIA
did its job. (vi)
Government tried and still tries to wash its hands of the whole
affair. (vii)
The 1986 Act gave H.M.Treasury the power at any time to revoke
the delegation to the SIB which had to report at least annually to the
Treasury, which had in turn to lay that report before Parliament. (viii)
H.M.Treasury did not exercise the control reserved to it. The
Equitable disaster followed. 4.
The Numbers who have
suffered loss. (i)
Equitable is always reticent and gives out only its own
message. However, best estimates follow. (ii)
At closure to new business in December 2000 about 1.1 Million
policies are believed to have been in force. Some are Unit-linked, so
holders are not in the With Profits Fund and subject to its risks.
However, Unit-linked policies ARE at risk in a Liquidation of
Equitable. In that event they are subject to reduction (Authority: the
FSA and the Baird report) (iii)
At the same date, there are believed to have been about 450,000
policy holders. There was a large number of company schemes with many
employees under one single policy. (iv)
In February 2001, Equitable told Nicholas Oglethorpe that there
were about 65/67,000 With Profits Annuitants. They cannot move from
Equitable because Equitable will not allow this. In any event, the
terms would be dire. (v)
ALL those annuitants will from 1st. February 2003 start to
suffer pension reductions of up to 29%. (vi)
ALL other Members of the With Profits Fund of Equitable
have already suffered large cuts in policy values and often severe
exit penalties in addition. 5.
Isn’t there a
compensation scheme? Yes, but:-
*
it only pays part of losses
*
it has never been used
*
payment will be fought bitterly by the industry who would be
expected to contribute according to turnover having suffered dreadful
Stock Market losses
*
it would take for ever to pay out 6..
Contacts.
David Ward and Nicholas Oglethorpe are both W-P Annuitants living in
Norwich. (i)
David will chair the meeting. He will be pleased to deal with
general questions about Equitable’s behaviour and about the aims
of the meeting. He is at 01603 452330. (ii)
Nicholas is helping to arrange the meeting. He is able to deal
with many detailed questions which arise about Equitable and how
Government let the public down by failing to keep it safe. He is at
01603 454210 or 250026. (iii)
It is NOT intended to bring forward individual hardship cases
to the media. Sad though these cases often are, the public interest
will best be served by emphasis on the collapse in public confidence
in the Pensions industry and Government reluctance to deal with it. Further reading:- Essential.
www.equitablelifemembers.org.uk
. (A mine of information with all press comment, constantly updated. A
journalist needs no more.) Notes
compiled by Nicholas Oglethorpe (January 2003) PRESS INFORMATION re EQUITABLE LIFE
“ANY
QUESTIONS?” TO BE STAGED BY EQUITABLE SUFFERERS (Norwich – 31 January 2003) On
the day before Equitable with-profits annuities will plummet by as
much as 29%, East Anglian pensioners and policyholders have hired a
hall in Norwich to stage their own “Any Questions?” with local MPs
and a Director of the company. The initiative is seen by annuitants
David Ward and Nicholas Oglethorpe who have organized the meeting at
their own expense, as the chance for frank exchange of view about
where the company is now, and what strategies exist among key players
to make the best of the pensioners’ plight. Local
MPs have readily rallied to the cause. Cabinet minister Charles Clarke
(Lab. Norwich South), Norman Lamb (Lib-Dem North Norfolk) and Richard
Bacon (Con. South Norfolk) will form an all-party panel; Equitable are
still considering whether to accept last month’s request for a Board
member to attend. Media
doom and gloom about the company have left hapless policyholders, many
elderly and feeling isolated, much in need of encouragement. Will the
Parliamentary Ombudsman have anything for their comfort, and if so,
when? What does the current and pending court activity presage? What
can Penrose achieve, and is waiting for Penrose a sufficient excuse
for paralysis? These
are among the issues expected to arise. David Ward, past-president of
Norwich Rotary who will be chairing the meeting, is determined to
steer the discussions towards strategies for the future, believing
that little is to be gained by raking over past annoyances. His fellow
organizer, Nicholas Oglethorpe, a retired solicitor, has been busy for
months studying the nuances of the Equitable affair, and expects to
make useful contributions to the discussion. Issued
23 January 2003 – for immediate release.
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