Equitable: 'No' to compensation

MORE THAN a million investors caught up in the Equitable Life pensions scandal will not get a penny in compensation, they learned tonight.

The Penrose report into the crisis at Equitable that saw savers lose billions of pounds of their retirement funds concludes that the society's management was to blame and the Government has no responsibility, despite its role as regulator, for sorting out the crisis.

Treasury Financial Secretary Ruth Kelly told the Commons that Lord Penrose's report found that 'a culture of manipulation and concealment on the part of some of the company's previous senior management allowed a bonus policy to develop that led to the society's financial weakening - a policy left unchecked by its own board'.

Despite the report's findings a lengthy legal battle is now inevitable, with the Government is almost certain to be pursued through the courts for up to £3bn of compensation by investors who will argue that as the ultimate regulators the Government of the day was responsible for missing the growing crisis at Equitable Life.

Equitable was forced to close to new investors in 2000 after 238 years in business when it lost a House of Lords case over guaranteed annuity pension policies it wrote between 1957 and the late Eighties.

These committed Equitable to bumper payouts to around 90,000 investors that eventually blew a £1.5bn hole in its balance sheet and led to returns being slashed for other policyholders.

As a result, hundreds of thousands now face having to carry on earning many years beyond their planned retirement dates - or the prospect of hugely reduced incomes when they stop work.

Ms Kelly argued that the Treasury cannot be held responsible for the failings of Equitable management. The Government also believes in principle that it cannot be held responsible every time an investment turns bad.

The Serious Fraud Office is still looking at whether there is a case for a full criminal investigation of the Equitable Life scandal. If it finds that policyholders were lied to about the true precarious state of the insurer's finances, a formal fraud inquiry is likely to follow.

Policyholders will be encouraged to dig out paperwork from decades ago to give a clearer indication of what they were told - and were not told - at the time.

The Government's rejection of compensation demands will anger policyholders, who have already waited 30 months for Lord Penrose's report to be written and published.

The Equitable Members' Action Group said today there was 'no evidence whatsoever' that regulatory laws in the Eighties and Nineties were designed to be so laissez faire that a scandal on the scale of Equitable Life could just 'slip through'.

There is also fury over the 77 days that the Government has sat on the report since it was handed over by Lord Penrose, a Scottish judge, just before Christmas. Campaigners fear that the delay has given ministers plenty of time to put their own gloss on the report, minimising its impact.

There has also been criticism of the fact that a relatively junior minister was 'put up' by the Treasury to handle the report, rather than Gordon Brown.