Swift move to compensate Equitable Life policyholders

13 May 2010

As I predicted during the campaign, the election of a Parliament with a Conservative-Liberal Democrat majority has led to the searing injustice of the Labour government's failure to compensate policyholders in the failed Equitable Life being remedied.

This has been a long-running saga but at its heart lay the failure of successive regulators to get to grips with the way Equitable Life over-extended itself and offered policyholders guarantees of returns that were never going to be sustainable. Enquiry after enquiry was set set up as the government tied to wriggle away from its responsibilities, which actually have their origins in the period of Conservative government in the early 1990s.

The insult to people who bought the Equitable Life promise in good faith was re-doubled when the almost instant compensation scheme for savers with the collapsed Icelandic banks was announced at the end of 2008. This merely fired up the determined and tenacious campaigners for justice for Equitable Life policyholders to new levels of activity and today's announcement owes much to their years of lobbying, mostly conducted with a remarkable degree of patience, intelligence and civility given that they were watching their fellow policyholders die stripped of some of the comforts of retirement that had saved so diligently for.

There will undoubtedly be some quibbles over the details of the scheme when it is announced in full but we should be glad this shameful episode in retail financial services is finally being drawn to a close.

Topics: UK Election 2010, Ombudsman, Equitable Life, Coalition

The election could be good news for Equitable Life policyholders

19 Apr 2010

Suddenly, there are very few certainties in this election. Amid all that uncertainly, however, we do know that anything other than an outright Labour victory, which looks extremely unikley at the moment, should result in a proper compensation scheme being put in place for Equitable Life policyholders - and quickly too.
Both the Conservatives and the Liberal Democrats have included a commitment to the policyholders in their manifestos, a level of detail that it is unusual to see at election times and which is down to the vigorous campaign that the policyholders have waged.
The Conservatives say: "We will implement the Ombudsman's recommendations to make fair and transparent payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure".
The Liberal Democrats say: "We will ... reward savers by ... meeting the government's obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme".
Labour doesn't have anything to say on Equitable Life in its manifesto. However, the Chief Secretary to the Treasury, Liam Byrne, did make a commitment in Parliament last month that the government would respond to the final recommendations of Sir John Chadwick - the former High Court judge charged with devising a compensation scheme, albeit within a very tight government brief - within 14 days of them being published in the middle of May.
Might and end really be in sight?

Topics: UK Election 2010, Ombudsman, Liberal Democrats, Equitable Life, Conservatives

Merricks departure as Financial Ombudsman leaves a very big hole to fill but a decent legacy

06 Jul 2009

Walter Merricks' decision to step down as chief ombudsman at the Financial Ombudsman Service does, for once, merit the description of being the end of an era. He has been the only holder of that post in the ten years the organisation has been running, having held a similar position with the Insurance Ombudsman Bureau for some years before that. The IOB was merged into the FOS in the wake of the passing of the Financial Services and Markets Act and the creation of the Financial Services Authority.

He has done an exceptional job, although you will find critics both among consumer groups and industry sectors, especially independent financial advisers. Some consumer organisations have maintained a persistent criticism that the FOS was too close to the industries it adjudicated on while IFAs frequently lashed out at him for being a consumer champion. He was neither, although the figures in terms of the percentage of complaints upheld suggest that the consumer groups might have more justification for their criticism. If IFAs really feel Walter Merricks was a "consumer champion" they had better hope most fervently that they do not get a real champion of consumer rights as his successor.

Of course, not everything the FOS did was perfect or above but criticism but Walter Merricks was always aware of that and submitted his organisation to independent review on more than one occasion, most recently at the beginning of last year when Lord Hunt of Wirral was asked to make recommendations for improving the FOS. It was an admirably open and engaging exercise (to which the All Party Parliamentary Group on Insurance & Financial Services contributed one of the most substantial set of recommendations) and the changes that followed will ensure that the FOS remains fit for purpose for some years to come. That is not a bad legacy for Walter Merricks to leave.

Topics: Ombudsman, FSA

Equitable Life battle lines become more entrenched

31 Mar 2009

The fight for compensation for Equitable Life policyholders is becoming more embittered at every turn. Just take a look at the tactics and the language being used by both sides over the last couple of weeks.

First, the Public Administration Select Committee followed up its pre-Christmas report with a second report reviewing the government's response. In this it slammed the government response to its initial report and the proposals by the Parliamentary Ombudsman, Ann Abrahams, that the committee had endorsed, as "shabby, constitutionally dubious and procedurally improper".

This was followed up by a letter to all MPs from Ann Abrahams who made it clear that she will use the full range of powers in the 1967 Act that governs her office which provide that "if, after conducting and investigation, it appears that injustice has resulted from maladministration and that such an injustice has not been, or will not be, remedied, I may, if I think fit, lay before each House of Parliament a special report on the case". I cannot find an example of these powers having been used in the 40 years since the ombudsman was created.

This row then exploded onto the floor of the House of Commons last week during Treasury questions when the government's attempts to hide behind its commissioning of Sir John Chadwick to come up with a hardship payment scheme were heavily criticised by MPs. This provoked an angry outburst by the junior Treasury minister Ian Pearson: "I am very disappointed that the Public Administration Committee should chose to obscure the real help that it accepts the government's payments scheme will deliver ... seemingly driven by an uncritical acceptance of the findings of the ombudsman's report and by its unjustifiable and irresponsible characterisation of the manner of the government's repsonse". This comment was meet by a barrage of shouts of "shame" and "withdraw" from the opposition benches and a stoney silence from the Labour MPs behind him.

The government is isolated on Equitable Life and knows it. It seems to think that by playing a delaying game the problem will go away. The cynics suggest that it is simply waiting for the Equitable Life policyholders to die which is happening as many of them were obviously at retirement age when they took out their annuities in the early 1990s. More likely it is running scared of the implications of agreeing to compensate for regulatory failure with the prospect of years of scrutiny and investigation over its handling of the banking and credit crisis. It does not want to set any precedent that will prompt the shareholders and customers of Bradford & Bingley, Northern Rock, Royal Bank of Scotland ... the list goes on and on ... to think that the government will compensate them.

I honestly believe that had the banking crisis not occurred the government would have been more generous in its response to the ombudsman's report. It wouldn't have been so acquiescent in allowing the ombudsman to investigate if its intention was to virtually stonewall on all of her recommendations. However, it now does have to accept that this issue will simply not go away or die off and find a more constructive way of engaging with the ombudsman, MPs, the policyholders and Equitable life itself: trading insults will get it nowhere.

The ball is now back in the ombudsman's court with her special report due to be delivered to MPs and peers straight after the Easter recess.