Watchdog cleared of Equitable failure

Policy holders are still seeking compensation

The City watchdog has been cleared of accusations that it failed to carry out its role during the period leading up to the collapse of Equitable Life.

Parliamentary Ombudsman Ann Abraham said she had found no evidence in her report to suggest that the watchdog failed in its regulatory responsibilities between January 1999 to December 2000.

Policyholders will be disappointed by the report, which could have given them greater bargaining power for compensation.

Ms Abraham said she had "deep sympathy" for policyholders who had suffered financial loss, but said she would not be investigating further complaints about the insurer.

Equitable Life's savers have seen the value of their pensions slashed after it lost a high court battle to alter the terms of some of its policies.

Penrose inquiry

"Given my very limited remit and the conclusions I have drawn from the investigation, I do not believe that anything would be gained from my further intervention, nor do I believe I could meet the expectations of policyholders in terms of the remedies they are seeking.

She has slammed the door, in a manner that will be soul destroying for those who have lost Stephen O'Brien, Conservatives

"It would be offering policyholders false hope were I to suggest otherwise," she said.

Many policyholders had hoped Ms Abraham would extend the enquiry to the pre-1999 years, after some evidence that Equitable's troubles went unnoticed for up to 10 years.

Stephen O'Brien, Conservative Treasury spokesman, said: "Now she has slammed the door, in a manner that will be soul destroying for those who have lost, by taking an immediate decision not to extend her investigation."

Policyholders will now face an anxious wait for the Penrose Inquiry, which will be published later this year.

Wider concerns

The report by Ms Abraham also raises wider questions about public expectations of the watchdog's duties.

She said there was a mismatch between expectations of its role among the public, and what it could reasonably be expected to deliver.

"It was never envisaged by those who framed the legislation establishing the regulatory regime that it would provide compete protection for all policyholders," she said.

But she said the style of regulation was a matter for parliament, not the ombudsman.