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15 January 2009

Government Responds to Equitable Life Report

The Government has today responded to the Parliamentary Ombudsman’s Report into the prudential regulation of the Equitable Life Assurance Society from 1988 to December 2001.

The Government is to set up a scheme to provide ex-gratia payments for those who have been most heavily affected by events at Equitable Life.  The Government has also apologised on behalf of public bodies and successive Governments stretching back to 1990 for the maladministration that it believes took place.

This response takes into account need to balance the interests of the taxpayer with those of policyholders, and that the financial difficulties in the summer of 2000 were ultimately precipitated by the Society’s own actions.

The Government accepts some, but not all of the Ombudsman's report's findings of maladministration by public bodies during the period under review.

Responding to the report today, Chief Secretary to the Treasury Yvette Cooper said:

“We are concerned that some policy-holders have been disproportionately affected by the events at Equitable.  It is on that basis that we intend to set up an ex-gratia payment scheme to help. We need to consider the fairest way to respond to policy holders and this is what we have asked Sir John Chadwick to advise us on.”

To see such a payment scheme established as quickly as possible, the Government has asked the Rt Hon Sir John Chadwick to examine the information and advise on:

Notes for editors

1.       The report was the second delivered by the Ombudsman and was based on a four-year inquiry.  It sets out the distinctive nature of Equitable’s business, which involved high volumes of policies with guaranteed annuity rates, and a well advertised policy of distributing earnings as bonuses without building reserves for the future.

2.       The report examined the role of regulators within the regime applied at the time. Issues relating to the company were outside the Ombudsman's remit. These were considered by Lord Penrose in his report in 2002, who found "Principally, the Society was author of its own misfortunes".  

The Prudential Regulation of the Equitable Life Assurance Society: the Government’s response to the Report of the Parliamentary Ombudsman’s Investigation

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