Equitable Life Policyholders: Compensation

Kate Green Excerpts

Thursday 23rd March 2017 Commons Chamber

[Kate Green (Stretford and Urmston) (Lab)]

I draw to the attention of the House my interest as a policyholder—mercifully, a very small one—in Equitable Life. I lost a few hundred pounds, but others lost very much larger sums. I endorse everything that the hon. Gentleman says. He has mentioned the lack of information accessible to the public. Does he agree that one of the most shocking things was the fact that, right up to the end, advertising continued to encourage people to put their savings into Equitable Life? I remember distinctly seeing large advertisements on the tube in 2000, weeks before the company went down.

[Bob Blackman]

Quite clearly, there was irresponsibility. I would absolve the current leadership of Equitable Life from that, because it has been co-operative in every way. It has identified the policyholders and assisted the Government and EMAG to ensure that everyone could be compensated. That does not apply to the previous management, however.

Let us turn to the current position. I applaud the Government for honouring the pledge to provide compensation to Equitable Life policyholders immediately after the 2010 general election. At that point, £1.5 billion was set aside to provide compensation. That was too little, and there is still a debt of honour, as I have said.

There are effectively four sets of people involved. The with-profits annuitants, of whom there are 39,858, have been paid out £336 million. The pre-’92 trapped with-profits annuitants were left out of the scheme quite deliberately, because the Government took the view that anyone who took out a policy before 1 September 1992 was outside the compensation limit. That, to me, was wrong, because those people could not have known that this scandal was going on. But I am delighted that the then Chancellor provided an ex-gratia payment of £5,000 to 9,000 people and that he extended it to £10,000 for those on pension credit.

We also have the non-with-profits annuitants, of whom there are 1,000,605. They have received, thus far, £749 million, but that represents only 22.4% of their losses. That is an arbitrary number. If the Government have accepted that they are responsible for the pensions of those individuals, it cannot be right that they receive an arbitrary percentage merely because that is the balance left of the money that was set aside. All I ask is for my hon. Friend the Economic Secretary to say that the Government will keep that under review and that, as the economy recovers, the compensation should be paid out.

--- Later in debate ---

[Fabian Hamilton]

I completely agree with the hon. Gentleman. Unfortunately, the time available limits what I can say about the judgment, and I want to talk about what we need to do now.

By the time Equitable was forced to close, it had more than 1.5 million members, and was one of the biggest societies in the world.

[Kate Green]

Does my hon. Friend agree that many of the members were in modest employment with modest earnings, often in the public or voluntary sector?

[Fabian Hamilton]

I certainly do agree, and I will go on to make that point. It is the very reason I took up this cause in the first place. Like many of my colleagues, I had believed that only the wealthy invested in Equitable—people with hundreds of thousands of pounds to put into their pensions seeking to make a huge return—but I discovered that, in fact, the average pension pot was just £45,000. Ordinary people, saving £20 or £30 a month over a working life, were investing in Equitable.

--- Later in debate ---

[Robert Neill]

My right hon. Friend is spot on about the gravity of the regulatory failure. It was not just the process—the nuts and bolts—that went wrong; there was a fundamental failure to see that something that had been put into the market should have been ringing alarm bells. That is a very important point. That is why the case that the Government should provide proper compensation is all the stronger. The superficially attractive argument that it was too good to be true so people acted at their own risk was put about quite early. It was also claimed that all those affected were lawyers—barristers and solicitors—consultants and the comfortable middle class. I have dozens of victims of Equitable Life in my constituency and most are modest people who had jobs that enabled them to put a little bit aside, which they did in good faith and were let down by the system. A Government-regulated system let them down. That is why the obligation is very strong.

My hon. Friend the Member for Harrow East referred to EMAG’s work. I declare an interest as a member of the all-party parliamentary group on the matter. I particularly pay tribute to my constituents, David Truran and Richard Collins among others, who galvanised our local group of Equitable Life victims. They work hard to keep people in their area, many of whom are elderly and quite frail, in the loop about what is happening. That is a valuable local service. As has been said, the information about the compensation scheme and the way it worked was less than user friendly, to put it mildly. There was a lack of transparency and it was sometimes difficult for people in difficult circumstances, in the latter years of their lives, to navigate the information. EMAG’s work, nationally and locally, to help them is important.

The moral case is overwhelming and I think that the Minister, given his background and experience, knows that. The coalition Government were right to move when the previous Government had sadly done nothing, and it is a fair point that something is better than nothing. However, that is not really a sound basis for policy, morally or in terms of good governance. Something was given, and circumstances now permit the Government to give more.

[Kate Green]

Does the hon. Gentleman agree that policyholders do not regard what they are entitled to as compensation? They simply want back the money that they saved—their own money, which they put in to their long-term pension savings, believing it would be given back, with a reasonable return, when they retired and needed it.

[Robert Neill]

That is an entirely fair and proper point. We use “compensation” only in a technical sense rather than to reflect the morality of what has happened. My hon. Friend the Member for Harrow East was right to describe the scheme as effectively a Ponzi scheme. In other jurisdictions, it would undoubtedly have been regarded as a fraud on the investors. They put in their money, lost out and the regulator that was supposed to protect them failed abysmally.

When the coalition Government introduced the compensation scheme, finances were difficult. Things have improved and it is not unreasonable to expect those people to be recompensed by more now. The distinction between pre-1992 and post-1992 annuitants was at best arbitrary. Although the case is made in a legalistic, dry, desiccated-calculating-machine way, it does not hold water for anyone who examines it. I hope for a measure of human decency and a broad view of the impact on public confidence. The Government let themselves down somewhat with that arrangement, although it was better than nothing. Now we can do better and I urge the Government to do that.

As well as the moral case, there is a case to be made for the importance for this country of good governance in our financial services sector. I am a passionate advocate of Britain’s financial services; 36% of my constituents work in the financial and professional services sector. It is a massive earner for this country and a jewel in our economic crown. However, it succeeds because of its reputation for integrity, which is based on the strength of its regulatory structures. When there is a failure, which is not followed by proper redress for those who lose out, confidence in our financial sector is dented and damaged.

As we emerge from the European Union—hon. Members know I regret that, but that is where we are—the financial services sector’s international reputation will be all the more important. It is in our national self-interest to ensure that we are seen to be 100% behind those who invest prudently and sensibly in our financial institutions. Britain is a world leader in the insurance sector, but this failure has the potential to damage us and it will always be held against us unless we do something to get it right. Given the national benefit that the sector brings, doing justice to the Equitable Life losers would be a drop in the ocean financially. Perhaps even for that reason, as well as for our long-term national economic self-interest, if not out of moral decency, the Government will think again.