Equitable Life

Fabian Hamilton Excerpts

Thursday 31st January 2019 Commons Chamber

[Fabian Hamilton (Leeds North East) (Lab)]

I start by paying tribute to my all-party parliamentary group co-chair, the hon. Member for Harrow East (Bob Blackman), who has given an excellent introduction and who has worked very hard indeed in the nine years that he has been in the House to try to bring about the justice that we all want for the victims of the Equitable Life scandal. I am sad that, after so many years of debating the issue, we are back here again today talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. They invested in the world’s oldest life assurance company in the belief that they would be able to live a comfortable old age, but instead, after a lifetime of saving, they find themselves sometimes destitute and often much poorer through no fault of their own.

How have we arrived here, nearly 20 years after Equitable Life closed its doors to new investors and nine years after the Government promised to ensure that the losses incurred by Equitable Life policyholders would be fully compensated? I hope that hon. Members will permit me briefly to go back over some of the history of this sorry tale in order to give the House and the public some answers to these questions. My first involvement in the Equitable Life saga was to speak in a Westminster Hall debate that I led on 24 June 2009. In that debate, I spoke about the serious issues facing so many of our constituents since the crash of Equitable Life following its inability to meet obligations and promises made to investors over decades.

In July 2008, the parliamentary ombudsman published her first report on Equitable Life, entitled “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, in which it stated:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced…Many are no longer alive, and will be unable to benefit personally from any compensation.”

[Alex Sobel (Leeds North West) (Lab/Co-op)]

I should like to thank my hon. Friend and neighbour for making the case for Equitable Life members. I should also like to pay tribute to my constituents, Ray and Marjorie Dunn, who have been brilliant campaigners for the Equitable Members Action Group. They have made these exact points: this has been going on for a very long time, and many pensioners are now well into their retirement and living in pensioner poverty because the Government have only partially compensated them. Is it not time for the Government to make up for their past mistakes?

[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.

[Joanna Cherry (Edinburgh South West) (SNP)]

I congratulate the hon. Gentleman and his co-chair on pursuing this issue so assiduously. As he says, the difficulty is that there have been so many reports. I have one constituent who is 84 and whose wife died three weeks ago. I have another who is 80 and who has just been diagnosed with dementia. Does the hon. Gentleman agree that those constituents need to know today that they will be compensated fully and soon, before they suffer further bereavement or illness?

[Fabian Hamilton]

I thank the hon. and learned Lady for that intervention. The story of her constituents is reflected up and down the country, in every constituency represented in this House, and I hope that we will get some answers from the Minister at the end of this debate.

[Alex Chalk]

Does the hon. Gentleman agree that the approach being taken seems inconsistent with the approaches taken in different contexts? For example, if someone is the victim of a crime, they can be compensated by the state for something that is not the state’s fault at all, and yet the state is more reluctant in circumstances where there was complicity, or certainly fault, from the state. Does he agree that is a troubling inconsistency?

[Fabian Hamilton]

Indeed, and if I am able to complete my contribution this afternoon, I will add to the hon. Gentleman’s point.

At the core of the problem is the fact that Equitable Life simply could not meet the obligations that it had made for itself, because it had made no provision for guarantees against low interest rates on policies issued before 1988. It declared bonuses out of all proportion to its profits and, indeed, its assets. Following the House of Lords ruling in July 2000, the society stopped taking new business in December that year, which effectively spelled the end for Equitable Life. More than 1 million policyholders then found that they faced cuts to their bonuses and annuities, which caused a huge loss of income on which many small investors had depended. After all, the average investment for the 500,000 individual policyholders was just £45,000 which, according to EMAG, even at its height would have yielded no more than £300 a month.

The then Labour Government unfortunately failed to introduce any ex gratia compensation scheme and refused to follow the recommendations of the parliamentary ombudsman. Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition stated their determination to introduce an Equitable Life (Payments) Bill early in the next Parliament should they form a Government after the forthcoming general election of 2010.

One of the coalition agreement’s plans for legislation did indeed include such a Bill, which became the Equitable Life (Payments) Act 2010. It was introduced early on in June 2010, shortly after the new Government took office. On 10 November, I tabled an amendment to the Bill in Committee that would have included the pre-1992 trapped with-profits annuitants—WPAs—who had been specifically excluded, as the hon. Member for Harrow East said earlier, from the proposed compensation scheme. The Bill offered 100% compensation to all with-profits annuitants who took out their annuities after 1 September 1992, and 22.4% to every other policyholder. Many right hon. and hon. Members on both sides of the House felt that that was inherently unfair, because the 1 September 1992 date was somewhat arbitrary. Many of the policyholders would unfortunately not even live to enjoy the compensation were it to be paid.

I tabled another amendment to that Bill, which read:

“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out”.

The amendment took just over two hours to debate and the vote was lost by 76 to 301, but it strongly set out the case for including the pre-1992 with-profits annuitants. Although that amendment failed in 2010, I still believe that it is vital to give equality of treatment to those who took out with-profits annuitant contracts before 1992 and who are still alive. As we have heard, those people are the oldest and the most vulnerable victims, and the cost could be met from the £140 million underspent from the £1.5 billion originally allocated by Parliament.

Rectifying the injustice would cost in the region of around £100 million. The lifetime payments to the post-1992 WPAs are 11% less than forecast, and there is no reason to expect that the total amount of £620 million allocated for those payments will ever be needed, let alone exceeded. That means that the separate contingency fund should now be released and distributed to victims, rather than remain in Her Majesty’s Treasury’s back pocket. Will the Minister confirm this afternoon that every last penny of the £1.5 billion already allocated by Parliament will reach victims as intended?

The Bill received Royal Assent in 2010, and the compensation scheme was set in motion. It was slow at first, but it began to pick up over subsequent years. By 31 August 2016, when the scheme’s final figures were published, over £1.2 billion had been paid out to 932,805 policyholders, although more than 107,647 have still to be paid but cannot be traced. Tragically, 15,516 policyholders have died, and their estates did not claim the payments despite attempts by the scheme to contact them. In addition, 894,507 non-with-profits annuity investors have been issued with lump sum payments totalling £751 million.

To conclude, when we examine the compensation paid to investors following the collapse of the Icelandic banks in 2008, for which every investor received up to £50,000 of their losses in full and quickly, the Equitable Life scheme looks rather less generous. Given that the average policy involved a total sum invested of £45,000, it seems rather unfair to me and to Equitable Life policyholders that they did not receive more, which is why EMAG continues to campaign for full compensation for all policyholders and why so many Members on both sides of this House support that view. I urge all Members—this is the last bit, Mr Deputy Speaker—current and future to take up the cause of Equitable Life policyholders to try to restore their faith in the ability of this House, as the elected representatives of the people, properly to secure compensation for the victims of one of the greatest financial scandals of our age. We have a moral duty and should not be afraid to carry it out.

[Several hon. Members rose—]