Equitable Life

David Drew Excerpts

Thursday 31st January 2019 Commons Chamber

[Fabian Hamilton]

Yes, indeed. I thank my hon. Friend and neighbour for making that point. I know Ray and Marjorie Dunn very well—they correspond with me regularly—and I know that my hon. Friend has been a champion of their case and of many other cases in his constituency. I will go on to say a bit more about how I think they should be compensated.

[Dr David Drew (Stroud) (Lab/Co-op)]

Would my hon. Friend accept that one of the biggest problems is that we have had so many investigations into Equitable Life, and that it was not helpful that the previous Government did not accept the case of the financial ombudsman, right at the beginning? There was a lot of, dare I say, confusion and deliberate misleading, but that report was very clear on where the blame should lie. This has not helped the case of the Equitable Life fundholders.

[Fabian Hamilton]

I thank my hon. Friend for making that point. The ombudsman’s report did indeed make it clear that this was a catastrophic failure of regulation, and that the Government bore considerable responsibility for compensating those who had lost out. I will go on to say more about that in a minute.

The Public Administration Committee also stated:

“We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

That was more than 10 years ago. On 5 May 2009, Ann Abraham, the then parliamentary ombudsman, published a second report, “Injustice unremedied: the Government’s response on Equitable Life”, in which she stated:

“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation.”

She concluded:

“In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied.”

There was certainly no shortage of reports—just a shortage of justice for those who had, through no fault of their own, suffered huge losses in the life savings they had accrued over years of hard work.

--- Later in debate ---

[Karen Lee (Lincoln) (Lab)]

It is estimated that there are around 1,500 victims of the Equitable Life scandal in Lincoln, and I have been working closely with some of them. After years of campaigning, nearly 1 million people are still being told that their compensation is limited to less than a quarter of the loss that they have suffered, and many of those savers are nurses, teachers, civil servants and shop workers. They are not people with stocks of wealth to keep them in their old age. They have worked hard all their life and put money aside for a secure and peaceful retirement, just as the Government advised them to do. It is therefore completely unjust to expect them to accept only a fraction of the losses caused by administrative errors that were out of their control.

In 2010, the Government accepted in full the parliamentary ombudsman’s findings that the victims of the scandal should be promptly compensated for their losses, and that those losses were directly attributable to chronic failures by the Treasury and regulators. The former Chancellor, the previous Member for Tatton, stood up in this House in October 2010 and implied that, despite accepting the ombudsman’s findings in full, the Government could not afford to allocate more than £1.5 billion for victims due to his choice of embarking on a damaging and counterproductive austerity project. It is worth remembering that, although there is cross-party support for this cause, every Member here knows that it was ordinary people who suffered under austerity, at the same time as very wealthy people got tax cuts, and those tax cuts were clearly the Government’s priority at that point.

[Dr Drew]

Will my hon. Friend give way on that point?

[Karen Lee]

No, I will not. I want to make some progress.

The victims appear to have fallen between the cracks of the financial crisis, which saw our banking corporations bailed out while hard-working and responsible pensioners were left to suffer. This is not charity. This is repaying hard-earned and prudently saved money to its rightful owners, and that is surely something that we should be supporting. The Government’s refusal to repay in full has real-life consequences. Hundreds of thousands of people across the UK have been denied the secure retirement that they made sacrifices for throughout their career.

In Lincoln, one of my constituents, Jill, has been fighting on behalf of local victims of this scandal. She said:

“My husband and I worked hard throughout our careers. We were devastated to find that all but a small proportion of our pension pot, for which we had saved so hard, has been lost to us. All we ask is that we are paid the money that is owed to us, and that we saved so hard for. I really hope that the Government will do the right thing and ensure that the thousands of claimants in Lincoln and across the UK finally get the pension they are entitled to.”

If austerity really is over—I am holding my breath on that one—I sincerely hope that the Government will finally listen to Jill and the hundreds of thousands of others who have, through no fault of their own, been stripped of their hard-earned savings. It is time for the victims of this scandal to receive the justice that they deserve and the full pension repayment that they have been fighting for.

[Kevin Foster (Torbay) (Con)]

It is a pleasure to be called to speak in the debate, and also to have a chance to reflect on how some of my constituents have suffered as a result of what happened with Equitable Life. However, it is probably worth my saying briefly now that, over the past few years, the tax take from the wealthiest in society has gone up, not down.

Let me turn to the general focus of this debate. It is worth remembering that these investments would not have been seen as high risk. People would not have thought that their capital was linked to the performance of the stock market. They would not have thought that they would lose their money entirely. They saw these investments as something for their lifetime savings—they used to be referred to as “widows and orphans” investments—and they would not have expected to lose the whole lot of their money. This was not buying shares in equity or playing on foreign exchange markets, when a person has to accept that there is a chance that they will lose not just what they think they might have gained, but the actual capital they invested. It is therefore understandable that this case has had much more of an impact on those affected than would have been the case had they been investing in the types of products with such enhanced risks.

I pay tribute to Usha Waygood, the co-ordinator of Torbay EMAG, for the determination that she has shown over many years, as well as for the information that she sent me ahead of this debate. It is worth reflecting on the fact that this is a business that ceased trading in 2000—19 years ago. It is clear that a total failure of regulation in relation to the company led to its collapse. The parliamentary ombudsman’s report was compiled in 2008—long before many of us in the Chamber had even been elected as Members.

There was then—the hon. Member for Leeds North East (Fabian Hamilton) reflected on this in his interesting speech—a lack of response by the then Government, which was a huge concern. Thankfully, that situation was partially rectified in 2010, when we finally saw some action taken with the independent commission. It is worth saying people still saw only 22.4% of what they had lost paid to them.

To help me put that into perspective, I asked some of my constituents who had been affected to set out the cost to them. For example, Mr Brian Wills-Pope said:

“I have had 10% of the differences I should have got.”

Mr Gordon Cook said:

“It has cost me about £5,000 per annum in pension.”

Mr David Jones added that the loss was approximately £30,000. He was paid around £6,000 from the compensation fund in 2012. When Mr Robert Clee emailed me, he said that his pension had seriously depleted over the past 25 years, which coincided with his retirement, which he thought that he had provided for adequately. That is the issue: many of the investors were approaching retirement and therefore had little opportunity either to take on new work or to make alternative arrangements before they felt the full impact of the hit to their finances.

For me, this is about not just what happened—that has been well documented—but about what could happen next. I certainly join other Members in asking the Minister to look at retaining all the necessary data in perpetuity, given that there is an ongoing impact on those affected. That reassurance should certainly not be too difficult to give.

I am also interested in hearing a bit more about the point that has been made by some campaign groups in relation to the pre-1992 with-profits annuitants who could be given equality with later annuitants through the £140 million underspend from the £1.5 billion that has been cited. I am realistic—I accept that money does not grow on trees and cannot just be printed—but perhaps something could be done over the coming years. No one is saying that the money should be paid immediately. We accept that these are people who are looking for support over a period of time.

It is worth looking at some of the other impacts that resolving these issues would have. It is about a potential reliance not just on state—national—projects, but at a local government level, given the age of some of these people. Clearly they are starting to make social care payments, which would have been mitigated had they received the savings that they originally expected to have for their retirement.

It is vital that we reflect on how we ensure that people have confidence that this will not happen again—I am sure the Minister will consider that when he comes to respond to the debate.

[Dr Drew]

There is another problem. I wonder how many of our constituents have faith in the ombudsman, given that when it has made a recommendation, that has not, in any way, been seen through by Government.

[Kevin Foster]

I think that it is probably safe to say that there has been some action from this Government in responding to the recommendations of the parliamentary ombudsman, but this is about building faith and about people having confidence. Let me be blunt about this. There are those of us who have just turned 40. We want to make sure that those who are taking part in auto-enrolment and who are looking to retire in the future have the confidence to start putting money aside. Bluntly, I am putting money aside now for my pension. I will be 68 when I am entitled to take my state pension. I have to be confident that my money will still be there in 28 years’ time. I accept that, as Members of Parliament, we are in a unique situation, but people in the workforce want to have confidence that if they put away money that they do not plan to access for 30, 40 or even 50 years, it will still be there. It is so vital that that confidence is there. Ultimately, the pension system, like any other savings and investment scheme, operates on the basis of confidence. People need to be confident that if they put money away, it will still be there. They need to understand the risk that they are taking at the time. As we touched on, people viewed these schemes them as a pension investment—a secure pot—not as a high-risk investment through which, yes, the returns might be high, but there was a clear and present risk to their capital as well as to any future profits.

I am conscious that we need to move on because we have another debate to follow, so I will draw my remarks to a close. I hope that we will be able to make progress and that people in Torbay who have been waiting for so long, and who probably would not have expected their MP to still be talking about this issue 19 years after the company’s collapse, will have something to look forward to.