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Equitable investors in line for £1.5bn redress

The Government is expected to issue at least £1.5bn in compen-sation to Equitable Life investors as part of the comprehensive spending review this week.

The move follows last week’s Public Administration Committee’s recommendation that officials should re-engage with Sir John Chadwick, who rec-ommended compensation of up to £500m.

In a meeting held in the House of Commons last week, the committee said the Government should have altered Chadwick’s terms of reference when it came to power to take account of all the Pensions Ombudsman’s 2008 findings.

A report published by the committee last week says: “We regret that despite the Government’s commitment to meet the Ombudsman’s recommendations, it did not properly explore the possibility of amending Sir John’s terms of reference back in May. Had this change been made, then it would not have significantly altered the timescale for delivering compensation.

“We therefore recommend that the Government re-engages Sir John Chadwick to establish what conclusions he would reach under terms of reference which reflect all 10 of the Ombudsman’s findings.”

If Whitehall leaks are to be believed, the decision has been forced through to form part of the CSR.

Equitable Life chief executive Chris Wiscarson says: “This report unequivocally shows that Sir John Chadwick’s advice has no place in the

Government’s decision on compensation to Equitable Life policyholders as a result of regulatory failure.

“The manifestos, the new Government’s coalition commitments and the individual pled-ges of 380 MPs, including the entire coalition front bench, have raised the expectations of our policyholders. Now the Government must deliver on those expectations.” Wiscarson told policyholders in September they should accept compensation worth £2bn, rather than the £4bn-£4.8bn calculated by consultant Towers Watson, due to concerns over Government finances.

The Public Administration Committee delivered its verdict following a two-hour House of Commons grilling last week. Parliamentary and Health Service ombudsman Ann Abraham, Sir John Chadwick and Treasury financial secretary Mark Hoban were all present at the meeting.

During the discussions, Abraham said the previous Labour Government had “misinterpreted” the ombudsman’s rep-ort and then built that misinterpretation into Chadwick’s terms of reference.

When questioned by Committee chairman Bernard Jenkin, Chadwick said he had been forced to submit his report without regard for the findings of maladministration and injustice which the Government did not accept. Chadwick said: “The effect of that requirement was that the ombudsman reached her conclusions on the basis of findings of maladministration which were more extensive than those on which I based my advice.”
The Treasury was unavailable for comment.

The Chadwick review was commissioned by the previous Labour government and published in July. It recommended that payouts be capped at £400m-£500m.

At the time, the Parliamentary Ombudsman rejected the rev-iew’s findings, saying: “If acted upon, it would not in any sense enable fair and transparent compensation to be delivered.”

The coalition agreement, which set out the Government’s policy on the matter, said it would implement the ombudsman’s recommendations to make “fair and transparent” payments to policyholders for their “relative loss as a result of regulatory failure.”


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