The Working Party’s RECTIFICATION BULLETIN NUMBER 4        October 24th 2004




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Letter to FSA on 18th October 2004  

Complaint against the FSA  

Remedy Sought  

We understand that in the Spring ELAS still had the task of reviewing 17000 cases eligible for a “Review”. Our register of computer connected annuitants amounts to 80 names and the progress reported on this sample so far is as follows:

Positive Offers Made 16
Rejections of Compensation   9
Total on register    80


Most of the letters from ELAS are difficult to follow and result in questions for clarification. The responses are usually regarded as evasive and unclear. Some annuitants have in desperation, anxiety and frustration accepted the offers whilst others are continuing to try to get satisfactory answers and are also preparing to progress their complaints with the FOS for adjudication.



So far we have not heard of anyone who has received an answer to the following question..” Please tell me the amount of annuity I should have received if I had been correctly informed at the time of my annuity purchase”


They refuse to answer this question and continue to use their own actuary speak language. The following is an example taken from a specific letter but the amounts have been converted into ratios.


“ When you retired the GAR was more valuable than the Society’s comparable current annuity rate and so when the GARs are applied the fund of 75 was worth the equivalent of 100.


We need to compensate you for the difference between the values of the GAR funds applied at retirement to the annuities that you actually took then. 75 and the value of the GAR annuity that we should have offered to you 100. That is the differential final bonus practice resulted in you getting benefits worth 25 too little in respect of your GAR policies.”


An Offer is then made for an additional annuity at a current annuity rate on the 25

Wheras it would seem in our view that the correct redress should be a revision of the whole annuity into a GAR annuity based on the fund of 100 .


We find it difficult to cope with the jargon that talks about ..”the value of the GAR annuity..” Most of us understand an annuity to be an annual payment but in this case they refer to an annuity as a capital sum.




In July we made a submission to the FSA that the revised Rectification Scheme 2003 was unfair and did not meet the requirements of the House of Lords Judgment


The FSAs first response asked us to provide evidence for our assertion that the current redress on offer was inadequate. In reply we extracted the relevant legal opinions reported on by Lord Penrose


On 5th October we received the FSA reply which- we regard as unsatisfactory -and quote below the answers to our questions.






4    Whether in view of our criticism of the FSA you will kindly pass on this letter to Mr Tiner?

I do not consider it appropriate for me to respond directly to your question about our internal procedures. However in dealing with your enquiries by telephone and in correspondence I can assure you that I have at all times aced in accordance with our internal arrangements for consulting colleagues including our senior management and out professional staff such as legal and actuarial advisers. In raising this issue you have indicated that you are unhappy with the way I have dealt with your enquiries If you wish to make a formal complaint about the FSA we have a complaints scheme whose contact details are……………….


1.      What action you can now take to verify the legality of the revised Rectification scheme?

As I made clear in my letter of 29 July, the FSA has had an opportunity to consider the revised arrangements that Equitable Life has put in place for the GAR rectification and, while we have not formally approved the revised scheme, we take the view that it is not an unreasonable approach. I have carefully considered the examples and details that you gave in your recent letter. I do not think it is appropriate for me to comment on the individual cases but as a general matter have concluded that you have not provided any new information would cause us to change our view of the reasonableness of the revised rectification scheme.


2.      Is it right that the Society fails to inform annuitants of the GAR annuity to which they were entitled at the time of their annuity purchase?

The calculation of the redress payable in particular cases is likely to be quite complex, and as I indicated previously, it is not clear to us that the information you are asking for will necessarily be of use in assessing an offer made under the scheme. It is our understanding that Equitable Life provides a basic explanation of its approach to calculating redress in the information it does provide and has checks in place to ensure that the approach is followed for individual calculations.


3.      What action or redress is available to annuitants who are dissatisfied with the results of their review under the scheme and who cannot get their proper GAR entitlement figures from the Society?

If a policyholder is dissatisfied with the offer that is made under the Rectification Scheme it is open to them to complain to Equitable Life or to the Financial Ombudsman Service. The FOS can consider each complaint on its merits. Our website has further information about making complaints and the ombudsman arrangements if you would like to know more about that.


We decided therefore to make a formal complaint and our final reply to the FSA was as follows :

Letter to FSA on 18th October 2004


 We are disappointed that it has taken three months to arrive at this situation and also very concerned that the FSA regard the revised Rectification Scheme as “not an unreasonable approach” in rectifying an earlier malpractice by the Society. Even this choice of words scarcely implies that the FSA has complete confidence in the fairness of the Revised Scheme.


The points which we believe are not in dispute are


·        ELAS admit they failed to provide correct information to many thousands of GAR policyholders who bought annuities between 1993 and 2000, and so the choice of annuity was based on incorrect and inadequate information.

·        Consequently a very large number of annuitants clearly made the wrong decision and are now suffering severe financial cuts in their pensions.


The contentious issues are however


(1)   The fairness of the restitution (if any) offered under the Revised Scheme


Equitable indicates that it has taken legal advice, which supports its position. It is not clear as to whether the FSA has had sight of this advice or indeed its source. This is in marked contrast to the first scheme, which was endorsed, as you know by eminent professionals. Many annuitants are suffering financial damage and the redress now on offer does not “make up the difference” but offers only a fraction of that difference


(2)   The adequacy of the information, which the Equitable is prepared to provide supporting any, offers or lack thereof.


Equitable defends its paucity of detail and supporting figures on grounds of complexity and workload. This is completely unacceptable since clearly any pensioner is entitled to the complete factual detail behind any offer or lack thereof in order to assess whether it does in fact give him his entitlement under the requirement of  legal Rectification The implied suggestion that the detail of the calculation is too complex for many recipients is insulting. The members should be given full information so that if necessary they have the option of seeking external professional assistance in understanding it.



We understand the FSA’s Objectives include “maintaining market confidence”, and “the protection of consumers”. We are therefore safe in asserting that our trapped, and distressed colleagues believe the FSA is not meeting those Objectives in the way it has condoned the Equitable Rectification Scheme 2003.


Regrettably therefore we will now have to register a formal complaint with the FSA Secretariat.  

Complaint against the FSA




Peter David Butler

86 Shortlands Road,



BR2 0JP.

On behalf of a Working Party of Equitable Life Annuitants affected by the Revised Rectification Scheme 2003


Email address         pdbutler@ntlworld.com

Telephone              020 8466 6446


Date                                   19th October 2004-10-18


Awareness Date


At the beginning of 2004 after publication by Equitable Life of the Revised Rectification Scheme 2003


Brief Details of Complaint


Towards the end of 2003 Equitable Life published its revised Rectification Scheme 2003 with the following claim


“Although the scheme is not regulated by the FSA we have developed it in discussion with the FSA and we have taken account of their comments and suggestions. The FSA have confirmed that they do not object to the scheme as it now stands”


Following the House of Lords Judgment in the Hyman Case it became necessary to provide a Benefits Adjustment Plan – called the Rectification Scheme – to provide appropriate compensation to many thousands of With Profits Annuitants who had previously held GAR pension policies and were given inaccurate information at the time of their annuity purchase.


The previous Board of Equitable Life set up a scheme based on considerable legal and professional advice but the new Board subsequently cancelled the initial scheme on the grounds of complexity and fairness and then replaced it with the revised scheme in November 2003 for implementation in 2004.


Towards the end of the first quarter of 2004 Offers under the revised scheme were issued by Equitable Life couched in opaque language and requesting acceptance within a 28 day period. A group of annuitants with computers exchanged information and concerns and this resulted in the formation of a small Working Party of the following annuitants who met to consider what action might be appropriate to correct what they deemed to be an unfair scheme



  NAME                                LOCATION      EXPERIENCE
  Peter Butler Bromley, Kent Chairman and MD of Vehicle Self Drive Hire and Leasing Company
  Michael Freegard London Chief Executive. Performing Right Society
  John Lawrence Salisbury, Wilts Oil Exploration, Consultant
  David Rogers London Partner in a Leading Firm of Headhunters
  Michael Woolgar East Sussex Chief Economist Esso Europe,.Director,EBC   Amro & Crescent Petlm


On July 6th the Working Party sent a report to Mr John Tiner of FSA supporting their conclusions that


1.   The Rectification Scheme 2003 is legally incorrect and does not meet the Society’s Obligations from the House of Lords Judgement, and


2.   The Society’s presentation of an “Offer” under the revised scheme is unclear, and couched in similar language to that described in the House of Lords Judgment as “opaque”. This will inevitably cause many annuitants difficulty and stress resulting in appeals and complaints procedures -or after frustration and exhaustion -signing the Acceptance form under feelings of duress.



3.  There is sufficient doubt on the legality of the Scheme and the way it is currently being implemented to justify an urgent formal legal assessment of it by the FSA.


Mr Stephen Walton of the FSA replied on behalf of Mr Tiner on 29th July suggesting that no evidence had been supplied to support the contention that the revised scheme did not provide adequate redress and so the Working Party sent a further letter on 9th August with that information.


On 5th October Mr Walton replied with a denial of the submissions we had made and stating, “although the FSA have not formally approved the revised scheme we take the view that it is not an unreasonable approach”.


As indicated in the Working Party’s concluding letter o f 18th October this response was unacceptable and that the FSA in condoning an unfair scheme was therefore not meeting its Objectives under the FS and M Act of 2000 in relation to “the protection of consumers” and “maintaining market confidence


Remedy Sought


The initial Rectification Scheme established after extensive legal and professional advice and was intended to implement the proper redress and was endorsed as correct by two eminent experts in Lord Browne-Wilkinson and Mr C J Hairs FIA together with other independent professionals to manage the scheme and resolve queries or claims.


The justification for scrapping this scheme relies on alternative anonymous legal advice, which differs from the original. Since this is in conflict with the previous advice we would recommend that

  • The new legal advice given to Equitable Life should be published and that  

  • Further Independent Expert Legal advice should be sought and published appraising the validity of the revised advice now being used by Equitable Life.  

  • Equitable Life should be directed to revert to the original Rectification Scheme and to have this overseen once again by independent professional experts.

This complaint should now be reviewed under the FSA Complaints Procedure and if the result of that is deemed to be unsatisfactory then the next step will be to send it to the independent Complaints Commissioner.




Peter Butler