I am asked to confirm that MPs invested in Equitable Life through their pension arrangements. Yes, Equitable Life was the preferred company for MPs making Additional Voluntary Contributions for their pensions. It means that many MPs in the Commons are not allowed to request compensation for the company’s clients as they would be themselves direct beneficiaries. Sensibly House rules prevent that kind of special pleading related to a particular company.
I am able to raise this issue because I opted out of the Equitable Life arrangement, not myself trusting the company. MPs could if they wished opt to do something else. I placed my pension savings elsewhere.
May 8, 2009
Thank you for that information John.
So It begs another question.
If MP’s are not going to be allowed to ask for compensation because it will be of no benefit to themselves, with regard to Equitable Life, will that be likely to put the General Public who invested in this Company in all innocence at a disadvantage.
Sour grapes comes to mind.
As MP’s I can understand the thought process that those who make the laws should not benefit unduly from them, but given todays revelations in the Telepgraph that some MP’s have been claiming back Stamp Duty on housing purchases (which is a TAX) in their expenses, this seems a little difficult to understand. After all the rest of us have to pay this tax.
The more I hear of the events at Westminster, the more I am concerned that some MP’S are not living in the real world at all.
If MP’s are not going to suffer or benefit under the same rules as the rest of us, then there surley is an argument that they should not be making the rules for the rest of us.
Reply:
The conflict of interest rule allows MPs to intervene and vote on matters that affect everyone – e.g. the tax system or benefit eligibility – but not to speak and lobby on matters that relate to individual companies or interests where MPs stand to gain.
May 8, 2009
Ok
Think I understand.
Can you confirm that Equitable Life was also the prefered Company the Government suggested for AVC’s to which all NHS staff and the Police could also contribute.
Belive other Government run establishments also had similar recomendations.
If this is the case, then the Government were already in effect advising millions of people to invest with this organisation.
May 8, 2009
From my personal point of view, The Treasury knowingly allowed Equitable Life to engage in fraudulent trading,
May 8, 2009
Not only allowed, but encouraged.
The FSA failed and failed miserably.
An unmitigated disaster.
In fact a 9 year early advance warning of the Bank debacle.
May 8, 2009
If the public trusted MPs, then the public would also find it acceptable for the House to pass a motion to waive that rule in a case where numerous members would otherwise be disqualified from speaking and voting.
May 9, 2009
John
Taking up this thread just a little further.
If a motion was put before Parliament with regard to compensation for EL Policy holders.
Would past and present Policy holders who were current MP’s be able to contribute to the Debate, and more inportantly vote on this issue.
Or would they be excluded.
Reply: They would be excluded from the debate, or at least made to declare the interest, depending on the moiton and the Chair’s ruling. They are not allowed to pursue the case for compensation for obvious reasons.
May 8, 2009
JR: “… I opted out of the Equitable Life arrangement, not myself trusting the company.”
I would love to know your reasons for not trusting the company.
Lola, on another Equitable Life thread, http://www.johnredwoodsdiary.com/2009/05/06/a-not-very-equitable-life/#comments
writes that the ‘regulator’ prevented him and some of his fellow financial advisers from speaking out about Equitable Life. Assuming the next Conservative government retain the existing regulatory framework will they consider allowing some mechanism where informed financial experts (e.g. yourself, Lola and his chums) can register dissent about a company or financial product?
May 10, 2009
I should clarify the ‘prevention’. From memory, Alan Steel went into print in Scotland identifying the practice being followed by EL to switch policyholders out of with profit PP’s with guaranteed annuity rates (GARs) into what were then called drawdown schemes. Doing so lost policyholders the benefits of the GAR This was clearly being done to reduce the costs to EL. EL then injuncted Alan Steel. AS took the case to the regulator, who backed EL ‘for market reasons’. And AS lacked the resources to fight EL. Hence this stopped any of us who were already suspicious of EL and had seen evidence of these same practices. You only had to look at the sales stats of drawdown schemes to be suspicious. We, as a small businesses, did not have the resources to fight legal action from EL, and furthermore under the regulatory structure we could be arbitrarily closed down if subject to such potentially financially disasterous action. Such action would almost certainly lead to failure of our businesss and very probably the loss of our homes and reputation. You have to undertsand the arbitrary nature of the FSA bureaucracy. It is Stalinist and apparatchik driven. If Alan Steel reads this he could perhaps clarify my memory of the facts.
June 15, 2009
Again, sorry for my late response but only recently notified of your reply.
What you write reinforces my view that the libel laws (I am assuming that was behind EL’s injunction) need to be relaxed.
May 10, 2009
In re your last paragraph, such a mechanism already exists. It’s called the free market. Or more accurately freedom and markets. Brown’s stalinist regulatory structure could not be better designed to allow licence to cartelised outfits to dominate financial markets.
As witnessed by the MPs expenses scam, the more ‘rules’ you have the worse it gets.
We need far far less rules in FS and those that remain need to be sensible, for example as Mr R advocates simple capital and solvency requirements for banks. We also must make the price of ‘regulation’ transparent. IMHO a product levy needs to be added to every financial product sold. So, if you buy a PP, the contribution is say £x plus 5% consumer protection tax. Similarly your bank could debit a monthly fee of ooohh say £2%. For the advice end of the business, e.g. me and my ilk, we could add regulatory costs tax to our invoices, say 5%.
In my case I am going to do this anyway as I am pig sick of being shafted by the FSA and Brown (well actually I am pig sick that my clients are being shafted by the FSA and Brown) and I am going to add a 15% Regulatory Costs Charge to all my invoices. We have not had to raise our fees for a few years as all our costs, ex staffing, have reduced or stayed roughly the same, except regulatory fees that have risen by over 1000%, yes, one thousand percent. And as proof as to how mad this is, our PI insurance costs have gone down. Clearly commercial insurers think we are a low risk and doing a good job, so why are our regulatory costs going up? It’s bonkers.
May 10, 2009
…Oh and one last thing, I am no expert. All I ever aspire to be is competent at what I do. Never forget that an ex is a has been and spurt is a drip under pressure.
May 10, 2009
Ok, Lola – let me recast my proposal as follows: financial advisors (e.g. you and your colleagues) and those with the relevant professional knowledge (e.g. JR) should be allowed to register dissents against a particular product or company. For example, “cannot see how Equitable Life can make the returns it claims based on the underlying assets”.
While you assert that free markets would make such a mechanism unnecessary may I refer you to Alan Jutson’s comments (May 8th, 2009 at 10:18) where it seems the ‘market’ (Equitable Life was a mutual society) thought nothing was awry with Equitable Life – far from it.
http://www.johnredwoodsdiary.com/2009/05/06/a-not-very-equitable-life/#comments
As Alan points out, none of us can be knowledgeable about everything so sometimes we have to rely on other people. For instance, sensible people will have a property surveyed before proceeding with a purchase.
May 10, 2009
Fair enough. I work for fees. My firms first assessment of EL was in about 1996 when pitching for a GPP scheme. We checked EL’s offering against L&G’s – on nil commision terms of course – and guess what L&G was better value. Also we are pretty sure that active fund management adds no value. So using index funds priced at institutional rates (i.e. wholesale prices) EL were shown to be expensive. In addition to which the info on asset allocation we could glan from EL did not correlate with the returns they claimed they were achieving. (words left out) Now, we had clients arguing that our fees were not worth it as EL paid no commission. Eh? How does that compute? In other words the mindset of the average EL saver was pathologically anti paying anybody for any knowledge. Why the bloody hell should we NOT be paid for what we know? They also stated that the FSA gave them a good rating. Yeah. Right. As recent have shown the regulator knows, well, (I can’t use the right word here) all.
So ‘the market’ did know that EL was wrong and not doable. The ‘market’ was muzzled by reggerlashun. and ignorance.
May 10, 2009
Lola
I think you are getting a little agitated, understandably, as clearly you have lost a number of deals to EL and thus fees.
I also work in business, the construction business as it happens, and we loose deals to competitors too, mainly to the cash cowboys who do not pay tax, do not charge VAT, and who often have no insurance.
Its frustrating, very frustrating and it costs me money time and time again, with wasted surveys and costing of jobs that we never get.
BUT
Most EL Policy holders were investing in EL way before your first contact in 1996. Which is very close the the date when trouble was first surfacing.
I started to invest nearly 30 years ago when absolutely no one had any idea that the Company. The oldest Insurance Company in the UK as it happens, and who was then trading to all intense and purposes correctly, were going to have problems in the future.
Clearly now with hindsight we can now all see what happened and when, but for most of EL’s policy holders it was too late to do anything, they were either already on an Annuity, or were faced with extreme exit penalties.
Like most I stopped investing once the situation was exposed, but like most, it was too little too late.
The Simple fact is the Regulator failed the Policy holders.
If a Builder failed you on a new house you would go to NHBC for compensation under their 10 year guarantee, and they would sort it out for you by correcting the problems.
All we are asking for is the same type of treatment and result.
May 11, 2009
Haha I thought you might have a go at the bit about fund management!!!