Equitable Life campaigners have claimed victory in the High Court as Judges extended the period for compensation claims back to 1991, rejecting the 1999 cap which the government had sought to impose.
Payments will still be on a case-by-case basis however, and grounds for eligibility have yet to be decided.
The High Court Judgment is the latest twist in a long-running wrangle over compensation, which has seen legal actions, a government inquiry, two reports by the Parliamentary Ombudsman and ongoing protests by investors who have seen the value of their pensions fall.
Founded in 1762, Equitable Life was the oldest mutual life assurance society in the world. It specialised in private pensions, offering ‘with-profits’ policies and guaranteed annuities. The firm paid generous ‘reversionary bonuses’ each year in addition to a guaranteed interest rate and the prospect of a ‘terminal bonus’ on retirement. During the 1990s it became apparent that Equitable Life was unable to meet its commitments. It cut bonus rates and reduced annuity payments in moves that severely disadvantaged the estimated 1m people who had pensions invested with the firm. In 2000 it lost a legal case over these changes and was defeated again in the House of Lords. The firm stopped taking on new business and introduced a high penalty fee for withdrawing funds.
Equitable investors claim that they were mislead by the firm, which failed to admit its difficulties. They argued that Government regulators should have intervened and that their failure to do so exacerbated their losses. An inquiry, headed by Lord Penrose, was set up to look into these claims and reported in 2004. The Parliamentary Ombudsman, Ann Abraham, investigated the government’s role in Equitable Life’s collapse and published a hard-hitting report in July 2008.
The Ombudsman’s report found that government agencies had indeed been negligent and suggested that compensation should be paid to investors who had lost money. Although the government admitted some responsibility, it resisted calls for blanket compensation and proposed instead to make ex-gracia payments to the hardest hit cases. It appointed a retired appeal court judge, Sir John Chadwick, to advise on how compensation should be awarded.
The Equitable Members Action Group, representing policyholders, requested a judicial review over the government’s failure to implement the Parliamentary Ombudsman’s recommendations. Lord Justice Carnwath and Mr Justice Gross partially upheld their challenge, although they agreed that the government was not obliged to compensate all policyholders and could operate an ex-gracia system as it proposed. They did agree that the government’s failings covered an earlier period that it had admitted and that policyholders from as far back as 1991 could pursue a claim for compensation, rather than just those from 1999 onwards. This ruling will boost the numbers of potential claimants considerably and has been hailed by campaigners as a major victory.
Pressure on the government continues, with an Early Day Motion brought before the House of Commons by the Liberal MP, Vince Cable. This has 331 signatures and notes with regret ‘the fact that over 30,000 people have already died waiting for a just resolution to this saga.’ On 4 November, Equitable Life campaigners plan to march on parliament with 15 coffins to symbolise the 15 policyholders they say are dying every day, ‘waiting for justice’.
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