Page last updated at 11:46 GMT, Tuesday, 16 March 2010

Campaigners spurn Equitable compensation plan

Equitable Life sign
No-one knows how many Equitable savers will receive compensation

A campaign group for savers in the Equitable Life insurance company has denounced the limited compensation process set up by the government.

Last year Sir John Chadwick was asked to design a suitable payment scheme.

It followed demands from the Parliamentary Ombudsman that Equitable members be compensated for their losses after its near collapse decade ago.

The Equitable Members' Action Group said Sir John's work was now becoming "farcical" and "dangerous".

The group accused Sir John's recently published third report of being a "Treasury stitch up".

"The latest interim report from Sir John Chadwick shows that the Treasury is attempting to retry the case, using actuarial sophistry to distort the figures, instead of accepting the recommendations of compensation found by the Parliamentary Ombudsman and upheld by the High Court", said EMAG's general secretary Paul Braithwaite.

"The logical conclusion of this sham process is that the government will deny all obligation to compensate policyholders for the damage done by serial maladministration and only paltry discretionary payments will be made on the basis of charity, not justice," he added.

'Wrong conclusion'

After the Equitable closed to new business in 2000 more than a million policyholders suffered large cuts to the value of either their prospective or current pensions as the society struggled to stay solvent.

Last October the High Court approved the government's plan for only limited payments to those who had lost money "disproportionately" in the Equitable Life pension company.

January 1999: Equitable tries to abandon making guaranteed payments it can no longer afford
July 2000: The House of Lords says Equitable must honour its original commitments, forcing the company to put itself up for sale
December 2000: Equitable Life closes to new business after failing to find a buyer
March 2004: Lord Penrose's report says the society was the "author of its own misfortune"
July 2008: The Parliamentary Ombudsman says regulators failed to protect policyholders and calls for a compensation fund

But the government was also forced to agree that the scope of the "ex-gratia" scheme should be wider than it first envisaged, and that it would thus cover more Equitable members.

EMAG says neither it, not the Equitable, has been allowed to see the calculations used by the recently appointed advisors to Sir John, Towers Watson.

But EMAG said his third report, published earlier this month, contained "a series of dubious assumptions piled one on another... leading Sir John Chadwick towards, surprise surprise, a conclusion that nothing was wrong in the 1990s after all."

"We contributed extensively and in good faith to Sir John Chadwick but it's apparent that he only has ears for the Treasury's submissions," Mr Braithwate added.

'Fair resolution'

The House of Commons will debate the government's handing of the Equitable Life saga on the afternoon of 16 March.

Sir John is planning to publish his final recommendations on the shape and size of the partial compensation scheme in May.

A Treasury spokesman said he regretted EMAG's stance, and stressed Sir John Chadwick's independence.

"Throughout this process, he has carefully considered representations from all interested parties, including EMAG," the spokesman said.

"He has given equal time and weighting to the views of those parties and this is reflected in his latest interim report, which publishes all the representations he has received.

"The Government is committed to achieving a fair resolution for policyholders and taxpayers alike," he added.

Print Sponsor

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific