Govt in the dock over Equitable Life
Thursday, 15 January 2009 12:00 AM
By politics.co.uk staff
Equitable Life victims could now be in line to receive compensation after the government today admitted part responsibility for the failures of regulators.
"It is clear that people have been affected, and have experienced significant distress due to events at Equitable Life," said Treasury secretary Yvette Cooper.
However, a quick resolution is not expected, with an inquiry under a judge, Sir John Chadwick, established to gauge levels of compensation - which could be a long and complex process.
Under the plans, compensation seems likely to be heading for those most in need, "as swiftly as possible" Ms Cooper told parliament, but blanket compensation is not planned.
"We intend now to set up a scheme to make ex-gratia payments to those who have been disproportionately affected."
However she stated: "It might take significantly longer than two years.
"We agree that there has been maladministration in particular areas and also that government action is merited as a result."
However, she quoted a report from Lord Penrose describing the principal author of the near collapse to be Equitable Life.
"It is right to look at the role of regulators within the regime that applied at the time. There was maladministration by public bodies in certain areas.
"There were questions that should have been raised [by the regulator] but were not."
She added some statements from the Financial Services Authority (FSA) could have misled investors.
"We also need to consider the fairest way to respond to policyholders now," she stated, calling for the faults of Equitable Life to be balanced by regulatory failures and costs to the taxpayer.
There were no promises on compensation for estates of those who have died, family members or interim payments for those in hardship.
"The responsibility to minimise risks and to prevent problems occurring in a particular financial institution lies, first and foremost, with the people who own and run that institution," Ms Cooper said.
Mark Hoban, from the Conservative shadow Treasury team, said: "I would also like to thank all the policyholders and their action groups who have made sure that this issue was always on our agenda.
"Their persistence has paid off. After years of trying to block compensation, the government has finally admitted that the regulators failed Equitable's policyholders and they deserve justice.
"It has been a long, hard fight by campaigners made longer and harder by the intransigence of a government who has consistently sought to evade taking responsibility for what happened at Equitable Life."
He added: "Why has the Treasury has sought to block, frustrate and delay this report and justice for policyholders? To hide the Prime Minister's embarrassment
"Whilst the Treasury delayed and dithered to spare the prime minister, 30,000 policyholders died and will never see the justice they deserved.
"And policyholders living on reduced pensions and annuities paid the price for the government's failure to act sooner."
Vince Cable, Liberal Democrat shadow chancellor, welcomed the apology.
"This comes after long and shabby treatment of victims. A period of maladministration under last government has become an own goal for this one," he said.
He also called for the government to explain why Icelandic savers were compensated so quickly, but not Equitable Life.
Ian Duncan Smith, the former Tory leader, said: "The reality is money lost is money lost. The government has the duty to provide compensation."
The government was due to respond to the review from the Parliamentary Ombudsman last year, who found ten cases of maladministration over a decade and demanded a government apology.
The delay will leave the prospect of compensation too late for many Equitable Life victims.
The Equitable Members Action Group estimates over 2,000 policy holders have died since the Parliamentary Ombudsman's report in July and as many as 10,000 victims will die without compensation.
Equitable Life faced near collapse in 2000 leaving over one million policyholders with reduced retirement savings.
The firm fell into trouble when the House of Lords ruled in 2000 that it had to pay out on policy guarantees. However, Equitable Life did not have the funds to cover all the guarantees.
The Ombudsman's report stated that the government should apologise for a "decade of regulatory failure" and identified ten instances of maladministration by its departments.
The report stated: "The public bodies responsible for the prudential regulation of insurance companies...and the government Actuary's Department failed for considerably longer than a decade to properly to exercise their regulatory functions in respect of Equitable Life."
Conservative MEP Sir Robert Atkins, who instigated the European Parliament's special committee of inquiry into the collapse of Equitable Life in 2006, said: "The way this government has treated Equitable savers just goes to highlight once again that it does not value those responsible people who put money away for their retirements. Chancellor - and now prime minister - Gordon Brown has fought tooth and nail to avoid any responsibility for the gross regulatory incompetence that has characterised this financial scandal.
"Many families will have to fall back on savings as the recession bites, but for around a million policyholders at Equitable Life, that may not be possible. Savers have waited the best part of a decade now for proper redress and while the government is right to be offering some compensation, this will be seen by many savers as too little, too late."
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