A not very equitable life

The Ombudsman decision to revisit the Equitable Life issue is a brave one. What else can she do, when her findings of maladministration by Labour’s Regulators have been ignored by the government, refusing to offer compensation as recommended?

The Conservatives have pushed the government to offer some compensation, given the obvious regulatory failings, and have said they will introduce a scheme.

What is the point of this government’s expensive regulators, if they drop the ball so badly? And what is the point of an expensive Ombudsman, if her critical report is ignored? Labour tell us we need to live ina world of Regulators and auditors, of Ombudsmen and investigators, all paid for by taxpayers,yet when the government is found wanting nothing happens.


  1. alan jutson
    May 6, 2009

    Yes more deliberate delay by Mr Brown.
    That was the conclusion reached by.
    1. An Independent report instigated by the Government.
    2. The Parliamentary Ombudsman Report which took nearly two years to produce, and which recommended Compensation should be paid.
    3. The EU Parliament.
    4. The Select Committee.
    The reason given for the delay:
    Mr Brown wants another report to see if he can only pay compension to those who can PROVE hardship.
    The man is a disgrace.
    The events took place before 2000 so in part the FSA failed both a Conservative and Labour Government.
    Given that this failure was highlighted back in 2000 you would have thought that this would have rung some alarm bells in Government, given that the FSA was supposed to be monitoring the BANKS on Gordon Browns instructions.
    The Government should pay the correct amount of compensation without delay, whilst most members are still alive.

    1. Janet Child
      May 6, 2009

      An example of play for time so that the problem goes away perhaps?

  2. Brian Tomkinson
    May 6, 2009

    A good example of the failings of our so-called democratic parliamentary government. Joanna Lumley eloquently expressed another example regarding the Ghurkhas to the hone affairs select committee yesterday. The tribal party system is failing the people of this country. We need MPs with backbone, honesty and integrity prepared to take on the government and defy their own parties for the good of the country. Unfortunately, mostly we have a collection of overpaid spineless whimps looking for an easy life, easy money and putting party loyalty above all else. This has to change and quickly.

  3. mikestallard
    May 6, 2009

    And who was that Ombudsman who got the sack a few years back because she found out too much?
    And what about (the late) David Kelly who found out too much?
    And what about Damien Green who found out too much?
    When the Socialists are in power, keep you head down!

  4. Denis Cooper
    May 6, 2009

    Perhaps the government should instigate legislation which says, in effect:

    If you’re an insurance company, offering to insure members of the general public against various risks, then you’re a retail insurance company;

    If you’re an investment company, offering to invest money on behalf of members of the general public, then you’re a retail investment company;

    And you can be one or the other, but not both.

    I don’t see why we continue with this historic entanglement between insurance, and investment, and I can see good reasons why they should be separated.

    1. Colston Hicks
      May 6, 2009

      Denis, there is no historic entanglement between ” insurance and investment “. ” Life assurance, pensions and investment ” is a logical association.

      1. Denis Cooper
        May 9, 2009

        Clearly there is; but as it’s not strictly relevant to the Equitable Life debacle I won’t pursue it any further here.

        1. Colston Hicks
          May 9, 2009

          Poor INVESTMENT is definitely relevant to the Equitable Life debacle, together with poor actuarial management of INVESTMENT. At the end of 1997 the actuaries decided that Equitable Life fund had a £1.72bn surplus to distribute among it members. Circa 1998 this was altered to a £1.5bn deficit.The actuaries ( internal and external ) were £3.22bn adrift!

  5. Demetrius
    May 6, 2009

    Amongst other things the then Public Trust Office was authorising investments in Equitable Life, after the Treasury and others had become aware that the company had serious problems.

  6. Lola
    May 6, 2009

    I have said all this before.

    We run a business ‘regulated’ by the FSA. The FSA are completely useless. It has not been light touch regulation – it has been wrong touch regulation. FSA regulation is classic box checking bureaucracy. It takes its lineage from the old labour manifesto cl 4, i.e. the man in whitehall knows best. It is a grand conceit. It’s nationalisation by bureaucratic coercion. That’s why it’s failed. But Equitable Life is different.

    EL had been (a questionable-ed) scheme for years. Blokes like me worked it out when they started selling shed loads of drawdown schemes to their own policyholders for no other reason than to get them out of the GAR’s. The management was (misleading-ed) and no regulation on earth would ever have found this out.
    Since we showed quite a few EL policyholders that their company was (unsuccessful-ed), could not validate its low cost claim, had no better investment performance than anyone else (hence subsiding the ‘outperformance’ of its WP fund from reserves), paid its salesman massive commissions, and whose plans were not as cheap as they made out when comparing like with like I do not feel at all inclined to bail out any policyholders at all. Especially as I personally will have to pay some of the money over through an FSCS levy.

    I made a bet that EL policyholders would get a bail out because a lot of them are the smug middle class and the great and the good, and they think that they deserve better because as they are oh so clever that they could not possibly have been wrong. I told many of them to diversify (seeing as how an insurance company is basically an Investment trust with a hobby) but they didn’t ‘Oh they don’t pay commissson you know’; So bloody what! Paying a small fee would have got you some decent advice that if you’d taken would have saved you a shed load of money.

    Did you also know that a bloke called, I think, Alan Steel, went to press with all this many years ago and EL injuncted him? He told the then regulator who then backed EL!

    The only solution to this is no regulation, well except for some simple capital adequacy rules and let competiton sort it.

    And another thing. I am incensed that RBS/Natwest, a(financially stressed-ed) business with a flawed business model has been kept in being with my money and is now competing with me! Talk about bad money driving out good.

    Grump Grump Grump
    A free and very open and competi

  7. Dennis L.
    May 6, 2009

    To make matters worse,it is no use complaining to Sir Anthony Holland,Complaints Commissioner about bad treatment by the FSA because all that he has ever done is to agree with their conclusion.
    Therefore,you may as well complain to your Grannie!!
    Labour has created at least 3000 quangos and most must be givven the bullet.

  8. SJB
    May 6, 2009

    I am an Equitable Life policyholder.

    To try and discover the Conservative Party’s policy on this matter I visited http://www.conservatives.com/Policy.aspx and entered “Equitable Life” in the keyword search box. 68 results were returned. The first was dated 24 January 2008. So I clicked on ‘Sort by date’ and – after checking the first five entries – the display appeared to be the same.

    So what would the Conservative Party in government do?

    1. Lola
      May 6, 2009

      Can I be blunt? Well I’m going to be anyway. Unless you can prove maladministration by The Gummint I reckon you can whistle for it. Why? See my comment above.

      You and everyone else have been fooled by thinking that ‘regulation’ allows you to stop thinking for yourself. It doesn’t. There were enough signs that EL was acting as a pyramid scheme for years before they went bust for you to sort yourself out. So, sorry, but it’s a free country and you are allowed to get it wrong.

      1. SJB
        May 7, 2009

        The maladministration point appears to have been concede by HMG:
        “I [Yvette Cooper, Chief Secretary to the Treasury] wish to apologise to policyholders on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001 for the maladministration we believe has taken place.” – Hansard 15 Jan 2009 Column 378.

        Many of us professionals missed the many signs, Lola. But as we had to pay towards the burden of regulation then I don’t think it is unreasonable for us to be compensated when we suffer loss as a result of failed regulation.

        As I mentioned above, the Conservative Party does not seem to have a policy on this matter from which I infer that nothing much will change when they assume office next year. So it seems our best hope for justice will lie with the ‘undemocratic’ European Union. 🙂

        reply: The Conservatives have said they will pay some compensation.

        1. Lola
          May 7, 2009

          Trouble is regulation is the problem, not the solution. Regulation lets you turn your brain off. ‘Oh they’re alright they are ‘regulated’.” Yeah. Right. And EL’s deceitful marketing ‘Oh we don’t pay commission (Oh yes they bloody well did – to their own reps) so we are able to keep more money for you’. This panders to a total deceit that commission is a Bad Thing. No it is not. We are all on commission in one way or another. And I speak as a wholly fee charging adviser of about 17 years standing. Nope. I am sorry. I reckon it is just another stitch up and I will be made to pay again for regulation failures. I have just received an interim levy from the FSCS to pay for the banking failures that I have been warning my clients about for yonks. In fact I have just found a letter on file that I sent to Tim Yeo in 1994 warning of just this problem.

        2. Lola
          May 7, 2009

          ….oh and from memory I think the MP’s AVC scheme was provided by EL. JR will be able to confirm or deny that.

          It all stinks.

        3. Lola
          May 7, 2009

          …oh and another thing. Listen to the market, not the useless FSA. The ‘market’ was telling you the banks were knackered long before NR went bust. Just look at the share price history. Well, the market, me and blokes like me, knew that EL was a deceit machine long ago, but the ‘regulator’ stopped us saying so.

        4. alan jutson
          May 8, 2009

          Lola makes a number of points which would perhaps be acceptable, if the information he says was available to him and his Company was freely available to the General Public.
          It is suggested we look at the share price.
          Unfortunately there was no share price to look at as it was a mutual company.
          All trade (financial magazines) for years were suggesting that EL was a top performing Company.
          The FSA gave it a clean bill of health every year.
          Government Departments I believe were recomending the Company to its staff for not only AVC’s but for Pension Policies as well, (my wife was working in the HNS at the time and her NHS Pension was with EL).
          The fact that when you have bought an Annuity, it is for Life (Government Rules) and you cannot change it, means that you are stuck with a Company no matter how bad it gets.
          When I started my Pension policy with Equitable Life about 30 years ago, No One, repeat No One, made any sort of suggestion that this was not a Company to do business with.
          On the contrary everyone I spoke with, both in and outside the industry said It was a well established and well run organisation.
          If the FSA had any doubts then or in future years it should have said so.

          I work in construction, I know much about the construction industry, Much that Lola never will, so I am comfortable about that industry, as indeed I am with Engineering as a this is an industry in which I also have qualifications.

          As a member of the general public I have no choice but to rely upon Regulators in other industries,
          You cannot be an expert in everything.

          Reply:I decided against it for two main reasons – one it was a mutual, which meant it had no shareholders funds and shareholders to fall back on, only its mutual reserves – and two, I couldn’t see how it could make the returns out of the underlying assets.

        5. SJB
          May 8, 2009

          I seem to recall from John Nott’s autobiography that he thought an insurance scheme would be preferable to regulation. That way, I suppose, the insurers would demand higher premia from the more risky enterprises. But has any country tried this approach?

          I agree with that there is nothing wrong with commission per se, but problems can arise in practice. For example, the churning that used to happen in the Lloyd’s Insurance market: see http://www.publications.parliament.uk/pa/cm199394/cmhansrd/1994-01-12/Debate-19.html. And, about two years ago, I investigated the possibility of obtaining a small mortgage (£25k) for someone with impaired credit history – but the commission demanded by the 3 (yes, three) intermediaries was out of all proportion to the loan.

        6. Lola
          May 10, 2009

          Au contraire Alan Jutson – I am also qualified in Civil Engineering as well as financial services. FS is my second career, which I went into as a business opportunity. I applied consultancy techniques to retail financial services and set up a business providing fee charging advice to retail clients and set about figuring out FS. It was the classic entrepreneurail thing – find a market, look at it in a new way, package up the existing elements in that new way. The problem you and every other member of the public is is how do you know the person or firm advising you knows what he’s at? Well, of course you do not. But ‘the market’ does. Successful firms will attract more customers. But approval by regulators is not repeat not the market judgement. It is a bureaucratic judgement. It actually gets in the way of the free market.

          In re EL not having shareholders as a mutual – I agree. But there is another rule that you can apply – if something looks to good to be true it almost always is. EL’s whole marketing bit was on ‘we don’t pay commissions’. Yes. They. Did. I know this. I was offered a job by them. So they had a one shot USP. Blokes like me though are the agents of the client. EL’s reps were the agent of EL. Our job is to judge outfits like EL for clients. But, I repeat the point that many EL policyholders were smug middle class profesionals, who although they themselves were paid by ‘comission’ , thought that the ‘nil commission’ EL was superior. In many cases it’s this attitude that’s got them into this situation. So why should I pay for it/them?

          The free market cuts both ways. You get freedom AND responsibility. Responsibility means taking hits like EL as well as rewards like privatisation issues. It also means that you have to think. If you don’t think, well…? And regulashun kills thinking.

          You might guess that I am extremely annoyed about this. And I have thought about it an awful lot. Every way you look at it regulation is THE problem. And excess regulation, configured and applied as nationalisation lite, is the mother of all problems. It gets right in the way of the normal and trustworthy exchange between free agents. It is sand in the gears of markets and wealth creation and freedom. It nanny’s people. It cons them that they do not need to think for themselves. It is sold to them by deceitful politicians as the panacea to the ‘ills’ of the freemarket. Of course there aren’t any ills, but people – including me – are lazy. If someone says they will sort of it for us, we’ll go with it.

          Hence the FSA box tickers could pass EL because it reported its numbers so those boxes could be ticked. And the FSA cannot ever say this company is bad, because that might not be the case or it might be but the company was getting sorted and would be OK. If on the other hand the market was giving signals, like a price, say a share price, then you could make your own judgement. EL’s price signal was apparently paying higher than average returns – which given the asset allocations and the performance of their unit trusts (transparent performance) just did not make any sense. Or to put it another way, it was paying more because it was higher risk. If it had used the true returns it was making it would not have attracted new business as it would have exhibited worse returns than many other insurers.

        7. Lola
          May 10, 2009

          SJB – your impaired credit mortgage case. Given the current state of sub-prime I would reckon the commission was probably about right! Plus arranging credit impaired mortgages is a nightmare. If we do these cases, and it’s a big if, they are always our thickest files. With more time and admin than pretty well anything else. Believe me it is expensive. Also it’s risky. Most credit impaired applicants lie to you. That then sends you back to go and costs you more time. Nope, the high commissions are about right. And for the avoidance of doubt, being as how I am fee charging, my basic budget for a credt impaired mortgage would be £1,500. And I’d want £500 of that up front for the investigation and data collation work. You can of course look at that price as a signal. Maybe I don’t really want that type of work or maybe it’s what it costs? So if you’re credit impaired how is my service going to help by costing you more money? It’s bound to add to your burdens. This is where commission comes in. Basically you, the client, are getting a loan from the lender (in this case) to pay an advisers fees. From the advisers side probably only about 1 in 3 of these cases works, so he has to budget for unpaid for time. The successful case subsidises the unsuccessful ones. As the existing customers of an outfit subsidise the special offers to new ones.

          I freely admit that there are problems with retail financial services, but Brown has just made things worse with his bonkers regulashun ‘system’.

        8. SJB
          June 15, 2009

          Hi Lola

          First of all, I apologise for the late reply but the email (curiously dated 11 June) alerting me to your response only arrived recently in my mailbox.

          In the end, the Abbey agreed a tracker mortgage despite the person’s impaired credit history. Her payments have dropped from £140 (2007) to £26pcm (2009). What struck me when accompanying her was that the IFA chap had to complete considerably more forms than the Abbey mortgage adviser.

  9. Tony
    May 6, 2009

    We have seen estimates of £5billion to put this right in the media, John. Am i correct in assuming you would be quite happy to pull £5billion out the bag and hand it out?

    Yes, there’s an issue about those who have genuinely lost out – there’s also an issue about fairness to taxpayers, though.

    1. alan jutson
      May 6, 2009

      As you had probably guessed from my ealier comments that both myself and my wife are Policy holders.

      I stood for election as a non Executive Director at the Company AGM back in 2001, but like some others without success. There was at the time too many independents standing, which split the vote.

      I would agree with your points if the Insurance Industry as a whole was Unregulated, we would then all have to accept the risk with our investment in any Company, if that was the case.

      But the fact of the matter is that successive Governments have all championed that the Industry IS CORRECTLY REGULATED, and further it is Regulated by a Government Department who are responsible for policing the Industry as a whole.

      This set up is to protect the Public from any Company that is deemed not to be operating correctly, or within the Regulations as set down.

      Equitable Life was Regulated by the FSA in common with all other Insurance Company’s.

      The FSA it seems, had inspected Equitable Lifes practices and operations for decades, without again it would seem, any form of complaint or concern about its operation.

      It would seem that no enforcement notices were issed against it, and to all intense and purposes Policy holders were completely unaware that anything at all was amiss.

      Given that 4 totally independent reports have all found that a Government Department charged with overseeing the industry and protecting Policy holders had failed, not just failed, but were guilty of MALADMINISTRATION.

      I think the Government should accept full responsibility.

      Yes all Policy holders accept that poor investment performance is a risk when we take out a Policy.

      But investors have no control or choice other than to rely upon the Regulators, to make sure that the industry is properly policed at all times.

      This is not the first time the FSA has failed.

      It failed to police the whole industry properly, remember the huge amount of miss selling cases (compensated for) and poor advice on Pensions with other Insurance Company’s. It also recently failed on the Banks.

      One Policy holders Pound is worth exactly the same as anothers. All have been hard earned, and all have paid tax on those earnings before making a contribution. So why should the compensation be different.

      The Government encouraged people to save for a Private Pension, we took that advice on board, and now its gone wrong they want to ditch their responsibility.

      Sorry, but I don’t agree.

      A Government Department has been found to be responsible for gross Maladministration, the buck and the cost lays firmly with them.

      So far Policy holders have waited for 9 years, many have died, the situation is shameful.

      Mr Brown talks freely about “Values” sadly the man’s actions do not match his promises.

      Meanwhile the MP’s Pension final salary scheme fund is going to be topped up by the Taxpayer to the tune of many hundreds of £millions.

      Justice I think not !!!!!!!

      1. Lola
        May 11, 2009

        By ‘Government’ you of course mean the taxpayer, as the government has no money. It would be better if it was ‘New Labour’ forced to pay for their alledged maladministration. And heads should roll, but they won’t. And even if hey did they’d all get early pensinspaid by guess who, the taxpayer.

        To be fair to the Tories their original idea of regulation was to control the privatised monopolies, not to produce a nit picking box ticking clutch of incompetents controlling every aspect of a particular business sector. This latter was what regulation morphed into under New Labour. It is now nationalisation lite. That’s why it fails. You can take Cl 4.4. out of the Labour manifesto, but you can’t take it out of Labour.

        1. alan jutson
          May 11, 2009

          Agree entirely.
          Regulation in recent years in most industries has become a very expensive overhead, but this Government promotes them to all and sundry as the Governments policemen which are absolutely neccessary.

          In the Construction Industry It has gone paperwork mad, I can only assume it is similar in other industries.
          We also pay levies on this, and levies on that, to lots of other organisations.

          The Reason:
          The Government want to finger someone to blame if it all goes wrong.

          What they did not expect was that the Regulator would fail and fail badly and the finger would point back to them.

          The sad fact is, the taxpayer as you say picks up the bill.

  10. SJB
    May 9, 2009


    I agree with the points you make. Yvette Cooper admitted (see above) that the maladministration happened over a ten year period under both Conservative & Labour governments. But as things stand I can’t see what is to stop similar maladministration going unchecked with other institutions. Have often do we hear the phrase “lessons have been learned” only to discover later that they have not. On a wider point, I wonder how much effect the Equitable Life and other regulatory failures are having in deterring youngsters from making provisions for their retirement?


    Thank you for sharing your reasons with us.

    1. alan jutson
      May 10, 2009


      With regard to your comments has it put youngsters off Pension saving.

      The simple answer is yes, unless the Employer is investing more of his money than you are yours.

      It has also put off myself.

      Being self employed at the time. All of my Pension fund is my own money.

      Since 2000 I have not invested a single penny in any Pension scheme.
      Low Annuity rates which you are forced to purchase under Government Legislation with your money.

      I do not trust the financial services market any more.

      If you do the calculation you do not even get your own money back (let alone any interest) if you live until 85. Assumed retirement age 65.

      Ever changing Rules and Regulations which effectively move the goalspost (but you cannot then withdraw your money if you do not like the new rules).

      The fact that you cannot get your money out, unless you invest it in another Pension scheme (transfer) sometimes at high cost/penalty. remember MVA’s.

      Lola makes a number of very good points, but the one that is wrong, and certainly wrong about me and many others, is that we are all fat cats, and smug middle class people.

      I learnt many years ago that in sales you never ever pre judge people, their worth, or their ability to pay.

      Whilst I hate to be critical of another blogger, I think Lola has got a little carried away with his comments.

      I work in Construction, and I can assure you that the Health and Safety culture and legislation required with regard to risk assessments and method statements makes the FSA requirements look like bean counting.
      As a Company Director I can be put in prison if it is deemed that one of our workers has done something (off his own back) that turns out to cause a fatal mistake.

      May see you at the AGM tomorrow if you are going.

      Thanks for the imput.

      Good of JR to lets us blog our concerns.

      Sorry John did not mean to monopolise this subject with my comments.


      1. SJB
        May 11, 2009

        Like you, Alan, I too stopped making further contributions to the pension scheme.

        Yes, the MVAs came as a most unwelcome surprise. I think I read in the personal finance section of one of the Saturday papers recently that another fund has had to introduce them – can’t remember why, though. The annuity element is a further unwanted restriction. I also found the original documentation to set-up the plan rather involved, even my accountant – having studied all the bumf – at the time had to ask a series of questions of the Equitable Life chap. How I wish my then accountant had screamed: “Don’t do it! Buy a flat and let it out, instead.” 🙂

        Governments work on a five-year time horizon so the difficulties accumulating now will be the problemd for whoever is in power in 20/30 year’s time. Have you noticed how these ‘die with dignity’ cases seem to be featured more on the news these days featuring the Dignitas ‘clinic’ in Switzerland? I reckon the civil service’s plan is to get euthanasia on the statute book for the difficult cases and then salami-style the restrictions are relaxed periodically until in about 30 years time pensioners become subject to an “economic viability test”, subject to exceptions for those who have given service to the nation like … former civil servants 🙂

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