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Switch now, say advisers

IFAs say the Penrose report has reinforced their view that policyholders should ditch any realistic hope of winning compensation and switch to another company with healthier investment prospects.

Advisory firms, including Hargreaves Lansdown and A&B, say the report has done little to encourage policyholders that staying with Equitable would boost their chances of redress. Since Equitable&#39s with-profits fund is now predominantly invested in fixed interest and gilts, they argue that most policyholders – depending on their contract – would be better off switching to a company with more aggressive asset allocation.

Towry Law agrees but says there may be an outside chance that policyholders could pursue former senior managers – who bear the brunt of Lord Penrose&#39s criticisms – if they are found to be covered by individual insurance. But even if that proves to be the case, it says it would be wrong for policyholders to stay with the society simply to try and avoid prejudicing their potential compensation claims.

IFAs say only policyholders close to retirement should consider remaining with Equitable, which most believe will survive after a turbulent three years. Their main concern for other policyholders is that the risks in staying have remained the same – Equitable&#39s thin reserves foremost among them – while the investment prospects have not improved.

Towry product research manager Simon Farrant says: “There could be mileage in considering a claim against the management if they were insured but I would not be holding my breath. It would be wrong to stay put for compensation.”

A&B head of pensions Michelle Cracknell says: “The report seems fair. The former board members should put their hands up and accept culpability. But policyholders&#39 position has not changed – if they are far from retirement, they should switch.”



September 1999

Policyholders lose Hyman test case in the High Court challenge over GAR policy January 2000

Court of Appeal finds for policyholders. With-profits bonuses suspended.

July 2000

House of Lords upholds ruling. Equitable puts itself up for sale, owing £1.5bn in guarantees.

December 2000

No buyer. Equitable closes to new business.

August 2001

Treasury commissions Lord Penrose&#39s inquiry.

October 2001

Baird Report into FSA handling – “die was cast” before regulation.

April 2002

Equitable starts legal action against 15 former directors and former auditor Ernst & Young June 2003

Parliamentary Ombudsman – no regulatory failure by the FSA

December 2003

Penrose delivers 818-page report to the Treasury

March 2004 Penrose report published.


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