Here’s an important story that Lib Dem Voice omitted to give the space it deserves this week:
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Commenting on the Coalition Government’s announcement that it has introduced a Bill to compensate Equitable Life policyholders, Co-Chair of the Liberal Democrat Treasury Policy Committee, Stephen Williams said:
“The Labour Government had 10 years to help the those who had their lives ruined by the collapse of Equitable Life and did nothing. In just 10 weeks the Coalition Government has taken real action to ensure that those who saw their pensions and life savings hit hard get the compensation they deserve.
“Liberal Democrats have long campaigned for proper compensation for Equitable Life policyholders and committed to it in our election manifesto. This announcement is further proof of our influence in Government.”
Here is what the the Lib Dem 2010 election manifesto said:
We will make pensions and benefits fair and 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.”
And here’s what the Lib Dems tried to do while in opposition in the last Parliament:
- Vince Cable tabled an Opposition Day Motion on 21 October 2009.
- Vince Cable tabled a cross-party EDM in May 2009 urging the Government to accept the Parliamentary Ombudsman’s recommendations on compensating Equitable Life policyholders.
But it’s only in Government the Lib Dems have now been able to take action to right a Labour wrong.
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And has a quick simple and fair scheme been set up?
The EL policyholders are unhappy:
http://www.guardian.co.uk/money/2010/jul/22/equitable-life-compensation-anger
Patrick Collinson lambasts their ingratitude at:
http://www.guardian.co.uk/money/blog/2010/jul/24/equitable-life-policyholders-grateful
Explainer from the 2nd link:
‘ . . Actuary Towers Watson was asked to calculate estimated losses based on Chadwick’s conclusions. It said the “relative loss” suffered by policyholders – the difference between the returns they received from Equitable and what they would have got if they had invested with another insurer – was between £4bn and £4.8bn.
But Chadwick said compensation should be restricted to 20%-25% of the actual loss they suffered at Equitable, between £2.3bn and £3bn, to reflect his view that most policyholders would have invested in the company irrespective of maladministration. Further reductions brought the final loss figure down to £400m to £500m . . ‘
LOL, this post is worthy of a North Korean news broadcast. How have the equitable policy holders reacted to this “compensation” scheme? Joy? Emotionally thanking Clegg & Cable? Tearful VTs for the news thanking the coalition? Ermmm yeh and in other news North Korea won the world cup.
I am an Equitable Life policy holder. Indeed, one of the reasons I’d never vote Labour again is because of the unfair way they treated us, and it was one factor in my joining the Liberal Democrats. It doesn’t look as if the payout will be very large, but I can understand that the money just isn’t there any more. It is Labour who are to blame.
Equitable Life Frequently Asked Questions (FAQ) [22 July 2010] is at:
http://www.hm-treasury.gov.uk/fin_equitable_life_faq.htm
which links to:
http://www.hm-treasury.gov.uk/fin_equitable_life.htm
‘ . . The Government will carefully consider Sir John’s report along with representations from other interested parties. A full response including the amount of funding available for the scheme will be provided, alongside other spending commitments, at the autumn Spending Review on 20 October 2010 . . ‘
Chadwick’s argument for only compensating for 25 % of the loss is Part 7 of this Report, which concludes:
‘ . . 7.76 Taking factors which I have identified and discussed into account, I am satisfied that there would have been some, but not a large, reduction in the extent of the new investment income which the Society would have received in the relevant period if the accepted maladministration had not occurred. In my view, the proportionate reduction would have been between one sixth and one quarter. As I have said, it is impossible to estimate with precision where, within that range, the reduction would have been. My own view is that, in respect of WPAs [With Profits Annuities] the reduction would have been at the upper end of that range; and, in the case of all other policy classes, towards the middle of that range.
On that basis I advise that, in the assessment of loss suffered by those who made new investments in the Society during the period between 1 September 1992 and 31 December 2000, the proportion to be applied to External Relative Loss should be 25% in the case of investment in WPA policies and 20% in the case of all other policies . . ‘ [p. 188]
One conclusion is that those who suffered the largest loss [relative to what they expected not what they were guaranteed – everyone got that] were the now very elderly policy holders who committed themselves well before the maladministration and will therefore get a smaller share of the compensation for it.