Dated 9th September
Last week I attended a meeting for MPs with an interest in the Equitable Life scandal which, before its collapse in 2000 was once one of our largest and most respected pension providers.
It’s a long history but this summary will suffice: about a million savers were affected and notwithstanding scandalous mismanagement of which the regulatory authorities were aware, the Government of the day refused to provide any assistance. It wasn’t until ten years later, when George Osborne became Chancellor in the coalition government, that a £1.5 billion compensation scheme was implemented. (It also took a decade for the company’s auditors to be fined for failing to warn the policyholders).
Osborne’s scheme dealt differently with each of the categories of savers. For the vast bulk of policyholders however, their settlement amounted to less than a quarter of what they had lost.
As far as the Government was concerned that was the end of the matter. For the campaign on behalf of the policyholders and their 240 supporters in Parliament, that was never going to be the case.
I came late to this group. My prejudice was that first, the policyholders were relatively sophisticated savers and should have had more ‘nouse’ to spot that their returns were too good to be true. Second, that compensation would be paid by all taxpayers, many of whom would never have been able to afford to put aside the premiums which they would now be paying to compensate.
A number of constituents badgered me until I made sufficient effort to investigate and discover how wrong I had been: overwhelmingly Equitable Life’s clients were of very modest means with small savings. Second, an impression was given within the public sector in particular, that Equitable Life schemes were somehow government approved.
I read the two reports by the Ombudsman into the scandal which are quite shocking and reveal the level of regulatory failure, and the fact that the Treasury was aware of it. Consequently, I came to the view that this fact alone makes the Government culpable and liable to pay full compensation.
The second report by the Ombudsman required that the settlement be fair to the policyholders, but also fair to the taxpayer in terms of what could be afforded.
It was against the background of the frightful state of the public finances inherited by George Osborne after the financial crash that he designed his compensation scheme.
The situation with respect to the public finances has since changed dramatically, and that is why MPs and campaigners are demanding that the settlement be reopened and a more generous provision be made. Ministers however, insist that the 2010 settlement was final.
The matter now falls within the brief of the new Treasury minister, John Glen MP for Salisbury, who came to our meeting to listen to the case we made last week.
He made no promises, but I hope he was impressed by the number of newly elected MPs who have joined the group: clearly, the issue is not going to go away anytime soon.
Lack of savings provision for pensions is a major problem that we face for the future. There is hardly an incentive for younger people to make that sensible provision when they see the shabby treatment meted out to pension savers of a previous generation, for what was a clear failure by government.
This campaign will run, and run.