A group of MPs are calling for the Treasury to maximise its compensation for Equitable Life policyholders, labelling the figures put forward by the Chadwick review as “risible”.
Liberal Democrat MP for Eastbourne Steven Lloyd is leading a group of 27 Lib Dem and Tory MPs working with the Equitable Members Action Group to push for “maximum compensation”.
In 2008, the Parliamentary Ombudsman published a report, Equitable Life: a Decade of Regulatory Failure, which found maladministration within the FSA and the Government Actuary’s Office concerning the oversight of Equitable Life.
Last year, the regulator accepted the findings of maladministration and apologised for the failures identified.
Lloyd, who is a member of the work and pensions select committee , says: “That does put a moral onus on the Government to take some responsibility.”
He is calling for the Treasury to pay £500m up front, with more compensation to follow.
He says: “I do not want to put a final figure on the amount of compensation the Treasury should pay above the initial £500m because I want to keep pushing the Treasury for the maximum amount possible.”
The Chadwick review, commissioned by the previous Labour Government and published in July 2010, calculated total relative losses of £4bn-£4.8bn should be reduced to a loss of £400m-£500m.
The Parliamentary Ombudsman rejected the review’s findings, saying: “If acted upon, it would not in any sense enable fair and transparent compensation to be delivered.”
The coalition agreement, which sets out Government policy on the matter, says it will implement the ombudsman’s recommendations to make “fair and transparent” payments to policyholders for their “relative loss as a consequence of regulatory failure”.
The board of Equitable Life this week wrote to the Treasury Financial Secretary Mark Hoban imploring the minister to honour the coalition commitment and to accept as the basis for compensation the definition of relative loss of £4bn-£4.8bn. Speaking in Parliament in July, Hoban defined relative loss as “the difference between the returns policyholders actually received from their Equitable Life policies and the returns they would have received if they had invested in a comparable product in an alternative life insurance company”. He added: “This step produces a loss of between £4bn and £4.8bn.”
Lloyd says he will question the veracity of the Chadwick report. He says: “£400m would be risible, completely unacceptable. I do not think the victims are going to get £4.8bn because in the current economic climate it is pretty unlikely we are going to be able to twist the Treasury’s arm that far but this is a ghastly situation and the Government cannot walk away from it.”
Hargreaves Lansdown pension analyst Laith Khalaf says: “Issuing the Chadwick report alongside a statement that the amount available for compensation will be announced in the comprehensive spending review might have been an attempt to manage expectation.”