The MPs have held no punches in labelling their response to the Parliamentary Ombudsman’s recommendations “shabby, constitutionally dubious and procedurally improper”.
Equitable policyholders have themselves lambasted the Government for its maladministration with regards to the firm and, in a long-awaited report published last year, Ombudsman, Ann Abraham found regulators and three Government departments guilty on ten counts of maladministration for not recognising clear signs that Equitable was struggling.
In January, Treasury Chief Secretary Yvette Cooper announced to Parliament that a scheme would be set up to make “ex-gratia” payments to investors who were “disproportionately affected”, adding that former Lord Justice of the Court of Appeal Sir John Chadwick would assess the extent of losses that could be attributed to Government boo-boos.
But in a new paper published today, committee chairman Tony Wright attacked the Government’s approach as “inadequate as a remedy for injustice” and called on Ministers to rethink their approach.
He said: “We are disappointed that the Government has decided that compensation is not warranted, arguing that it is under no duty to put right, even in part, wrongs that it admits the State has caused. This may be a legally valid position, but we think that most people would consider it to be a morally unacceptable one. The only potentially valid reason that the Government provides, namely that Parliament has considered that financial regulators should not normally be held liable in the courts for financial loss, we find to be shabby, constitutionally dubious and procedurally improper.”
Wright called for the disproportionate impact test to be scrapped altogether to make the scheme simpler and urged the Government to make interim payments to policyholders who need them most.
In other news, advisers are not surprised that MetLife is significantly increasing the price of its income for life and capital guarantees due to market volatility. The firm is also cutting the maximum equity exposure available from 85 per cent to 60 per cent, effective as of April 7.
The price of MetLife’s income for life guarantee for the highest equity exposure will increase by 55 per cent from 95 to 145 basis points. For the lowest equity ratio of 35 per cent, the cost of the guarantee will increase from 50 to 70 basis points.
The price of the capital guarantee will jump from 55 to 130 basis points for the lowest equity exposure, while for the highest equity exposure, the guarantee will cost 180 basis points compared with 150 previously. All changes are for new business only.
Hargeaves Lansdown pensions analyst Nigel Callaghan says: “I am not surprised by this. It is simply a reflection of the cost of the derivatives that underpin these guarantees. The price is directly related to the volatility of the market and the more volatile they are the greater the cost of those derivatives. But I do not think that investors will be impressed.”
MetLife strategic development and marketing director Dominic Grinstead says: “We still believe the products are very attractive in the current market as clients seek security.”