Equitable Life Policyholders: Compensation

Robert Courts Excerpts

Thursday 23rd March 2017 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I will aim not to disappoint, Madam Deputy Speaker.

I thank the Backbench Business Committee for securing this extremely important debate. I congratulate the hon. Member for Harrow East (Bob Blackman) and my hon. Friend the Member for Leeds North East (Fabian Hamilton) on their extremely hard work over a number of years to try to secure adequate compensation for everyone who lost out as a result of this scandal. The issue of Equitable Life and the fate of those who lost out after investing has been debated by Members on both sides of the House for more than 15 years. As has been said, there is a great deal of cross-party work on this matter. Throughout that time, the Equitable Life Members Group and the all-party group have campaigned tirelessly to ensure that the issue is not simply kicked into the long grass. I am pleased to have another opportunity to press the case for those who lost out.

After a long battle, I appreciate the action that the Government have taken to date for those affected by this scandal. However, as we have heard from Members and our constituents, many policyholders remain short-changed, receiving a payment of less than one quarter of the compensation to which the ombudsman found they would have been entitled. The second ombudsman’s report was clear that the aim of the compensation scheme should have been to put people back into the position they would have been in if maladministration had not occurred. Despite that—we have heard this from many Members today—1 million people have received only about 22% of the compensation they are due.

[Robert Courts (Witney) (Con)]

The hon. Gentleman, like all speakers in the debate, is making a very powerful point. I, too, have received a great number of letters from constituents who have corresponded with me about the money that they or their relatives lost. He is right to say that they received only 22% of the compensation they expected. Is it not the case that we are dealing with pensioners and that we are losing about 15 a day? If the Government were to look again at whether, with a growing economy, more could be done for the people who have lost out, that would need to happen sooner rather than later.

[Justin Madders]

The hon. Gentleman is absolutely right. We are dealing with people who are getting on in years. As he points out, sadly about 15 policyholders a day are dying before the situation has been resolved. I am strongly of the belief—we see this for a whole range of issues—that the longer people wait for justice, the harder it is to appreciate that justice has been served.

The core of this issue is that many people feel that, even after all these years, justice has not been done. That message has come across loud and clear from my constituents and those of other hon. Members who have spoken. These people worked all their lives only to find that their pension pot has failed to materialise in the manner they were promised and they genuinely believed would occur.

In practice, this means that people who spent decades working for a comfortable retirement have had it denied them. It means that they are downsizing or even re-mortgaging their homes in their old age just to make ends meet. That is clearly not what we want for people who have contributed throughout their lives.

--- Later in debate ---

[Mike Weir (Angus) (SNP)]

At times, the debate has seemed like a meeting of old lags, since some of us have been discussing this issue for many years.

I would like to be able to say, like other Members, that many of my constituents are still coming to see me about Equitable Life. I cannot, however, although many constituents used to do so; unfortunately, time has done its work and there are now few left. They are people like my constituent Gertrud, an elderly lady who thought she had made the right choice and would have a decent standard of life in retirement, but who is now living off 25% of what she thought she would get, which is very difficult. The situation is the same throughout the country. My hon. Friend the Member for Edinburgh North and Leith (Deidre Brock) unfortunately cannot be here today, but she told me of her constituent Ishbel, who is in the same situation. These are elderly people who had made the right decision and found that they had lost out.

The motion before us today notes that the Government have made no further funding available in the spring Budget. Several Members have mentioned that this is similar to the situation of the WASPI women. These are totally different issues—one is about retirement age while the other is about the amount received from private pensions—but, as others have mentioned, they bring us to the same thing: ever more people believe that it is not worth saving for pensions. That will cause huge difficulties in the future. Young people today say, “What’s the point of doing that? Look at what’s happened to others, like my granny. That’s what is likely to happen to me.” Reports such as one today saying that the pension age is likely to go up yet again, and young people may now be working into their 70s before getting a pension, continue to undermine confidence in pension provision. We will face a huge problem in the future if we continue in this way.

I was an MP when we tried to persuade the last Labour Government to do something about this issue, and they turned their face against that and refused to do anything. I acknowledge that the coalition Government and the current Government have grasped the thistle to some extent, and have made some money available. They must be given credit for that, but of course it took a report from the ombudsman to get the ball rolling for compensation, and she concluded that the state of the public finances was “a relevant consideration”, which I suppose is why we are still here today.

Part of the difficulty is that there is a huge difference between the amount sought by the action group and the sum the Government say was actually lost. There is no real agreement as to what the total losses are. In a sense, the Government came down in the middle with a figure of £1.5 billion, and in coming to that figure cited the state of the public finances. It is disappointing that the Minister stated in his letter to the hon. Members for Harrow East (Bob Blackman) and for Leeds North East (Fabian Hamilton) of 30 January, which was circulated to us:

“The announcement was clear that the funding available to the Payment Scheme was not a fixed amount of £1.5 billion but rather that up to £1.5 billion would be made available.”

Should we take that as confirmation that the Government have no intention of even putting the remainder of that amount—about £140 million, I understand—towards the plight of those who have lost out? To be frank with the Minister, given the Government’s previous record, that seems rather small minded and mean, and it undermines the Government’s commitment, which they have shown previously, to tackle this matter.

EMAG argues that the policyholders’ pension savings, carefully accumulated over decades, should be safeguarded in exactly the same way as funds deposited in banks and building societies. They have a point, although they should not stretch it too far, as there is a limit on those funds and it is not an exact analogy. But it is also worth recording that, in her response to the Government scheme, the ombudsman stated:

“I am unable to conclude that the Government’s proposals comply with the recommendation for the establishment of a compensation scheme which I made in my report.”

Such comments will continue until the Government do something to address the continuing sense of injustice.

Others have said that Equitable Life was touted as a long-established, steady company, and that small business people and the self-employed were encouraged to invest their pension savings in it. When I was a practising solicitor—many years ago now—Equitable Life was considered one of the best investments, which is why so many people were encouraged to go into it. Increasingly, however, we are being encouraged to invest in pension provision to augment our state pensions, and people will find it difficult to have confidence in any pension company while this issue remains unresolved. It is also clear that fewer than half of new pensioners will receive the whole of the new single tier pension when it is introduced, so this issue is becoming more and more important.

The fact that pensioners now have much greater freedom to access their pension savings will also greatly alter the pension landscape and the attitude of savers towards pensions, but it could also make it more difficult for companies’ investment strategies. It is doubly imperative in this new environment that there is confidence in the stability and worth of pension investment. Pension investment is not the same as putting money in a bank or building society; as we know, it depends on fluctuations in the market and the type of investment made.

[Robert Courts]

The hon. Gentleman is making many powerful points. He has mentioned confidence. Does he agree with the point made by the hon. Member for Strangford (Jim Shannon) that, having encouraged members of the public to do the right thing and invest in what was seen as a secure and safe scheme, there is a danger that a precedent could now be set and that those people could now decide that investing in a pension would not give them safety or security in retirement? Does he also agree that the unfairness that that creates is unhelpful to the pensions industry as a whole?

[Mike Weir]

Indeed it is. That is the point that I was making.

Some of us are now getting to the age at which we are beginning to think seriously about what our pensions will bring us—it is going to hit us pretty shortly—but I have children who are in their 20s, and this is a very long-term investment for people in their 20s and 30s. Young people today who look at the WASPI women or at Equitable Life pensioners will not have the same confidence that people of my generation might have had that they are putting aside savings to augment their state pension. The state pension is changing, and we are looking at different ways in which people will invest for the future, such as auto-enrolment. All these things require confidence, but that confidence has been undermined by continuing scandals such as Equitable Life.

The Government have to look at the bigger picture, rather than simply looking at Equitable Life in isolation. They have to look at how we can get over this hump and ensure that all young people make provision for the future. If we do not do that, a much bigger problem will be coming over the horizon when those young people get older, having made no provision because they lacked confidence in the system. What are we going to do then? The fall-backs that exist today will no longer be there for them. I urge the Minister, even at this late stage, to go back to the Chancellor and say, “Look at the bigger picture. Look at how we are dealing with pensions. How can we get confidence back?” If we do not do this, the picture will get even worse later.