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A matter of competence

The question of whether the Government should compensate Equitable Life policyholders, as suggested by Parliamentary Ombudsman Ann Abraham, with a reported bill upwards of £4bn has caused a furious debate.

Other life office investors have found themselves in worse situations on performance. Some funds closed after perilous bets on equities in the TMT bubble while Equitable rode out much of that storm.

There are arguments to say the country cannot afford compensation, particularly after the Northern Rock rescue, and that we do not have a zero failure regime for regulation. The timing, brought about by a disgrace-ful lack of Government cooper-ation over the years, is unfortu-nate but has nothing to do with the rights and wrongs here.

There are suggestions that Equitable Life policyholders are rich but many are much worse off than the popular myth would suggest and wealth or lack of it has nothing to do with the fact that regulation failed people.

What the Parliamentary Ombudsman has identified are 10 failings in administration. That means Government institutions, the FSA, the Government Actuary’s Department and the Department for Trade and Industry failed over time to ensure Equitable was a going concern able to meet its obligations and undertakings with assets to back them. Equitable was treated like a special case – its supposed “efficiency” allowing it behave in a different way from others.

Many Equitable policyholders and investors held off from taking claims to the Financial Ombudsman Service due to Government manipulation on the Penrose report. We think many policyholders were missold and they should have gone to FOS. On the whole, they cannot now because of time-barring.

We wonder just how individual losses will be shown, that is, what other actions would policyhold-ers have taken and so perhaps the bill will be lower than one might think once this is taken into account. Abraham did not place a figure on compensation.

But on the principle that when a Government or regulator undertakes to ensure a company has reserves to meet its promises to pension savers and it fails to do so because of incompetence, then the Government should pay.

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