Equitable Life — House of Commons, 2015-02-26
Topic: Domestic Commerce
Andrea Jacqueline Leadsom (Conservative, Centre-right): Yes, I am In line with representations received, out of that £1.5 billion, we covered the relative losses of the with-profits or trapped annuitants in full. Those annuitants were unable to move their funds elsewhere or to mitigate the impact of their losses by seeking employment. They were also generally the oldest policyholders. The remaining available funding, on the advice of the independent commission, was distributed pro rata to other policyholders, representing 22.4% of their relative loss. I know that that was deeply disappointing to many. These difficult decisions were taken in the light of the position of the public finances and in the interests of overall fairness to all taxpayers The motion notes that "the Parliamentary Ombudsman recommended that policyholders should be put back in the position they would have been in had maladministration not occurred" However, the ombudsman went on to say that the impact on the public purse should also be taken into account when considering payment. She also stated that she was acutely conscious of the potential scale of what was recommended. She has subsequently written to the all-party group to say that the Government’s decisions on affordability and eligibility cannot be said to be incompatible with her report I congratulate all Members who contributed to the debate. It is clear that they have been assiduous in representing their constituents and have done an excellent job. My hon. Friend the Member for Southend West (Sir David Amess) talked about Ernst and Young as the auditors of Equitable, so he might be interested to note that in 2010, for its part in Equitable Life, it was fined £500,000, plus costs of £2.4 million, and received a reprimand by the accountants’ joint disciplinary scheme The hon. Member for Airdrie and Shotts (Pamela Nash) asked for a regional breakdown of amounts paid. No breakdown by region has yet been compiled, although we could produce a basic one if that would be particularly helpful. However, I assure her that regionality does not influence the scheme’s operation in any way My hon. Friend the Member for Harrow East, as well as the hon. Member for Coventry North West (Mr Robinson) and my hon. Friend the Member for Southend West, talked about the situation for the pre-1992 annuitants and the fact that they are elderly and financially vulnerable. The first regulatory return from Equitable Life that would have been different had there been no maladministration was that of 1991. This was available on request from Equitable Life from mid-1992 and could not, therefore, have been expected to influence investor decisions before late 1992. Therefore no relative loss was suffered by this group. However, as hon. Members have recognised, the Government agreed that this group of pre-1992 annuitants, although they are not affected by maladministration, have suffered significantly from a loss of income that they would have expected. For this reason the Government made an exceptional ex gratia payment of £5,000 to this group, with a further £5,000 to those on pension credit, in December 2013. The hon. Member for Leeds North East and the right hon. Member for Knowsley (Mr Howarth) raised the question of compensation for the Icelandic bank savers in Icesave and why Equitable Life savers are being treated differently. The ex gratia payments to UK depositors in Icelandic banks were made as a result of a decision by the previous Government to guarantee all qualifying retail deposits specifically to protect the financial stability of the UK. The financial compensation scheme was simply the agent for these payments and we expect to recover all those sums from the Icelandic banks and are continuing to do so Specifically in the case of failed banks and why they receive compensation, the Financial Services Compensation Scheme is funded by a levy on financial services firms, so again those compensations do not come from the public purse In answer to the hon. Members for Moray (Angus Robertson) and for Airdrie and Shotts who asked when the scheme stops tracing people, all policyholders are either written to at their last known address or put through electronic tracing methods, such as looking them up against the electoral roll. Attempts are made through the Department for Work and Pensions to trace those owed more than £250. I should tell hon. Members that about 50% of the remaining policyholders are due less than £100 My hon. Friend the Member for Poole (Mr Syms) asked whether we could re-allocate the remaining £500 million. That remaining £500 million is to make ongoing payments to annuitants for the duration of their annuity. Finally, the hon. Member for Stretford and Urmston (Kate Green) and my hon. Friends the Members for Bromley and Chislehurst (Robert Neill) and for Southend West asked what we had done to ensure that people were not put off the idea of saving for their retirement. As hon. Members know, the Government have undertaken a fundamental reform of the regulatory system, and put in place the Financial Services Act 2012 to establish a new system of specialised and focused financial services regulators. They abolished the FSA and set up new regulators within the Bank of England and the independent conduct of business regulator, the Financial Conduct Authority. These reforms are designed to ensure that the conduct of firms, and with it the interests of consumers and participants in our financial markets, are at the heart of the regulatory system and are given the priority that they deserve The recent news on the improvements that this economy has made since 2010 is to be welcomed and shows that this Government’s long-term economic plan is working, but we have a long way to go to restore the public finances, and the public purse remains very constrained. It is right that we have taken action on the Equitable issue, but we must balance this with the need to continue to address the difficult position of the public finances and the impact on fairness to all taxpayers. That is why this Government have no plans to change the funding available to the payment scheme. Our focus is rather to complete the small number of remaining payments. We have continued to make excellent progress with the scheme itself. Only this week I was pleased to report that over £1 billion has been paid to nearly 900,000 eligible policyholders In conclusion, I genuinely have deep sympathy with those who carefully saved for retirement and are not receiving the income they expected. Resolving the Equitable Life issue, and doing so swiftly and in a way that was fair to all taxpayers, has been a priority for the Government.