HM TREASURY News
Release (PN 04/09) issued by COI News Distribution Service. 15
January 2009
Government
Responds to Equitable Life Report
The Government has today responded to the Parliamentary
Ombudsman's Report into the prudential regulation of the
Equitable Life Assurance Society from 1988 to December 2001.
The Government is to set up a scheme to provide ex-gratia
payments for those who have been most heavily affected by events
at Equitable Life. The Government has also apologised on behalf
of public bodies and successive Governments stretching back to
1990 for the maladministration that it believes took place.
This response takes into account need to balance the interests of
the taxpayer with those of policyholders, and that the financial
difficulties in the summer of 2000 were ultimately precipitated by
the Society's own actions.
The Government accepts some, but not all of the Ombudsman's
report's findings of maladministration by public bodies
during the period under review.
Responding to the report today, Chief Secretary to the Treasury
Yvette Cooper said:
"We are concerned that some policy-holders have been
disproportionately affected by the events at Equitable. It is on
that basis that we intend to set up an ex-gratia payment scheme to
help. We need to consider the fairest way to respond to policy
holders and this is what we have asked Sir John Chadwick to advise
us on."
To see such a payment scheme established as quickly as possible,
the Government has asked the Rt Hon Sir John Chadwick to examine
the information and advise on:
* the extent of relative losses suffered by Equitable Life policy holders
* the proportion of losses which can be apportioned to a) the
maladministration accepted by the Government, and b) the actions
of Equitable Life and its advisers
* which classes of policy holder have suffered the greatest
impact as a result of the maladministration accepted by the Government
* factors arising from this work which the Government might take
into account when reaching a final view on determining whether
disproportionate impact has been suffered
Notes for Editors
1. The report was the second delivered by the Ombudsman and was
based on a four-year inquiry. It sets out the distinctive nature
of Equitable's business, which involved high volumes of
policies with guaranteed annuity rates, and a well advertised
policy of distributing earnings as bonuses without building
reserves for the future.
2. The report examined the role of regulators within the regime
applied at the time. Issues relating to the company were outside
the Ombudsman's remit. These were considered by Lord Penrose
in his report in 2002, who found "Principally, the Society
was author of its own misfortunes".
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