EQUITABLE LIFE MEMBERS
ANNUITANTS AND RECTIFICATION
The Working Party’s RECTIFICATION BULLETIN NUMBER 4 October 24th 2004
PROGRESS ON OFFERS OF RECTIFICATION
(click on line you may be interested in:)
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:
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.
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.
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.”
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
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
5th October we received the FSA reply which- we regard as unsatisfactory
-and quote below the answers to our questions.
SUMMARY OF THE FSA RESPONSE ON 5TH OCTOBER TO OUR SECOND LETTER OF 9TH AUGUST.
FOLLOWING SHOWS OUR QUESTIONS IN BOLD
WITH MR WALTON’S ANSWERS IMMEDIATELY BELOW FOR QUICK REFERENCE
4 Whether in view of our criticism of the FSA you will kindly pass on this letter to Mr Tiner?
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?
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?
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?
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.
decided therefore to make a formal complaint and our final reply to the
FSA was as follows
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.
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
Consequently a very large number of annuitants clearly made the
wrong decision and are now suffering severe financial cuts in their
contentious issues are however
The fairness of the
restitution (if any) offered under the Revised Scheme
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
The adequacy of the
information, which the Equitable is prepared to provide supporting any,
offers or lack thereof.
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
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
therefore we will now have to register a formal complaint with the FSA
behalf of a Working Party of Equitable Life Annuitants affected by the
Revised Rectification Scheme 2003
Email address firstname.lastname@example.org
020 8466 6446
19th October 2004-10-18
the beginning of 2004 after publication by Equitable Life of the Revised
Rectification Scheme 2003
Details of Complaint
the end of 2003 Equitable Life published its revised Rectification Scheme
2003 with the following claim
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
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.
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.
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
July 6th the Working Party sent a report to Mr John Tiner of FSA
supporting their conclusions that
The Rectification Scheme 2003 is legally incorrect and does not
meet the Society’s Obligations from the House of Lords Judgement, and
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.
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.
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”.
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
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.
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
complaint should now be reviewed under the FSA
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.