Equitable Life

Mike Weir Excerpts

Thursday 26th February 2015 Commons Chamber

[Mr Mike Weir (Angus) (SNP)]

It is a somewhat novel, perhaps unique, experience for me to be speaking in support of a motion that begins:

“this House congratulates the Government”.

However, credit where credit is due. Many of us raised this issue consistently with the previous Administration, who refused point blank to take any responsibility for the regulatory failures that led to the disastrous situation at Equitable Life, despite the fact that their own report by Lord Penrose pointed clearly to the regulatory failures in this case. This Government have grasped the nettle and introduced a scheme that has given some relief to many thousands of policyholders who have lost out.

Interestingly, in the last update on the scheme issued by the Treasury, it appears that some 160,000 policyholders have not come forward to submit a claim. A large number of people have still not taken advantage of the help that is offered at the moment, and we should continue to urge them to come forward. It took the report from the ombudsman to get the ball rolling on compensation, and I suppose the reason we are still debating it today was her conclusion that

“the diversion of scarce public resources is a relevant consideration which should be taken into account and weighed in the balance along with other relevant considerations”.

Despite what the hon. Member for Harrow East (Bob Blackman) said, there is a huge difference between the amount sought by the action group, which is about £5 billion, and the amount originally proposed by the Government, which was as little as £500 million. EMAG’s website quotes two vastly different figures, and the Government came down in the middle with a figure of £1.5 billion. I agree with much of what the hon. Gentleman said—we need to deal with the issue of compensation—but first we have to negotiate the sums involved.

The action group has consistently campaigned for full compensation. Its members thought it unfair that “affordability constraints”, as the Government put it, meant they did not get the full compensation to which they were entitled and that they only received 25% of the full amount. Its paper calls it a double injustice that Equitable pensioners should not only bear the cost of the Treasury’s inability to regulate Equitable Life in the 1990s, but be denied the full compensation owed to them because the Government’s inability to regulate the banking sector

“blew a hole in Government finances”.

There is some justice to that.

As the action group points out, policyholders have received compensation amounting to only 22.4% of their losses, and it argues that people’s pension savings, carefully accumulated over decades, should be safeguarded in exactly the same way as funds deposited in banks and building societies, but that is a dangerous argument to make, because funds protected in banks and building societies are subject to a maximum, so it is not complete protection.

[Roger Williams (Brecon and Radnorshire) (LD)]

I am sure that like all right hon. and hon. Members, the hon. Gentleman and I have constituents affected by this matter, and what they fear most is uncertainty. Mr and Mrs O’Meagher, who are 80 and live in my constituency, have to travel to London so that Mrs O’Meagher can give music lessons in order to top up their income, but they cannot continue to do that, and with their losses from Equitable Life, they see their life in terrible trouble.

[Mr Weir]

The hon. Gentleman makes a valid point, and I agree that this matter needs to be tackled—I shall say something about that shortly. In a follow- up report, the ombudsman was unable to conclude that the Government’s proposals complied with her recommendations for the establishment of a compensation scheme. Even the ombudsman says that more needs to be done.

Like most Members, I had many Equitable Life policyholders in my constituency, and I have had a considerable postbag on the issue from the outset. Many of the policyholders were elderly, and sadly some have died as the saga has ground on, but there remains a great sense of injustice among those still living. Equitable Life was touted as a long-established steady company —when I was a practising solicitor, it was seen as a gold-standard company. No one realised the problem lurking below the surface.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Many solicitors told their clients that they themselves had their pensions with Equitable Life and recommended it.

[Mr Weir]

I never had my pension with Equitable Life, but the right hon. Gentleman makes a good point. Many solicitors, accountants and other professionals invested in Equitable Life. It was popular with financial advisers because it was seen as a safe, steady company, but it turned out not to be, and people lost a lot of money because it was not properly regulated.

The Government need to consider future pension provision. Increasingly, we are being urged to invest in pension provision to augment our state pensions, and with the recent revelations that less than half of new pensioners will receive the whole new single-tier pension when it is introduced next year, that is more relevant than ever. The new rules granting much greater freedom for pension holders to access their pensions savings will greatly alter the pensions landscape and the attitude of savers towards pensions, but it might also make it more difficult for company investment strategies. It is imperative in this new environment that there is confidence in the stability and worth of pensions investment—it is not the same as putting money in a bank or building society, where the rate of interest is known, pitiful though it might be at present; it depends on fluctuations in the market and the type of investment made. Admittedly, there is no guaranteed return—there is always an element of risk—but for most people it is a major investment, so the risk should be as small as possible.

[Mr Alan Reid (Argyll and Bute) (LD)]

I agree with the hon. Gentleman. The public need confidence that the pension industry will be regulated properly, and in this case it obviously was not—the Government Actuary’s Department failed. Now that the public finances are in a better state, I think the Government should pay up in full, as recommended by the ombudsman, otherwise people will not have confidence in the future.

[Mr Weir]

I agree with most of what the hon. Gentleman says. We have to grasp the nettle because it is becoming ever more important that we have confidence in our pension provision. If we fail to give people that assurance, we risk them not having the confidence to invest in pensions, or taking their money out at the earliest opportunity, leading to even greater pressure on the public finances. Equitable Life remains a running sore, and so long as that is the case it risks damaging the whole industry and the attempts to encourage future pension savings. It was not simply a bad investment; the regulator failed to do its job, and that led to substantial losses.

We accepted that people were due compensation on the basis that the amount offered would be determined by the state of the public finances, but, as I said, there remains a gulf between the various amounts suggested. Before we come to any agreement, therefore, we must be clear about the amount involved, but it would be unwise to make it a party political issue just because there is an election around the corner—voters base their decision on many issues, including, in some cases, Equitable Life—but if the public finances are improving, of which some of us are less convinced than others, it is right that Equitable Life policyholders be considered anew. I urge the Minister to consider greater compensation.