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Equitable Life Minutes of APP Group

06 March 2010

Minutes of the meeting of the

All Party Parliamentary Group on Justice for Equitable Life Policy Holders

Held on 24 February 2010 at 3.30pm

In Committee Room 7

Present: Daniel Kawczynski (Joint Chair)

Fabian Hamilton (Joint Chair)

Susan Kramer (Secretary)

Paul Braithwaite and John Newman, EMAG

And 90 Members of Parliament (or assistants)

Speakers: Rt Hon Liam Byrne MP

Sir John Chadwick

Chris Wiscarson, chief executive of Equitable Life

Liam Byrne’s opening address:

Members should send him any questions that there is not time for.

Commented that he had only arrived at Her Majesty’s Treasury (HMT) six

months ago and that the most complex problem regarding this situation is to

find a scheme that was fast and fair.

Argued the timetable for progress is ‘as fast as possible’

Sir John Chadwick’s third Interim Report will be published in the next week

or so. The final report to be delivered in May, with the Government’s response

within a fortnight of that.

Sir John Chadwick’s opening address:

There have been calls for a first-hand summary of how work is progressing.

First Interim Report was issued in August 2009 and the second in mid-

December 2009.

Has taken a decision in favour of a ‘flexible’ approach which has been

unanimously welcomed by policy holders

Explained that one possible reading of the Parliamentary Ombudsman (PO)

report is that only those who could demonstrate that they relied on the annual

regulatory return to make their investment decision would qualify. There are

two issues here:

1. It would be difficult to have a case-by-case view on what policy

holders would have done 20 years ago.

2. The method fails to include those who could not have made a

choice, the trapped annuitants, and those that invested pre-1990.

If he had adopted this ‘reliance approach’, it would exclude these policyholders,

which would not be fair. It is also unrealistic because the regulators

would have made impositions to change the Society’s behaviour.

To take an alternative flexible approach may have conflicted with Terms of

Reference (TOR). This was resolved by the Judicial Review ruling in October

2009 and the TOR were expanded and formalised in November 2009, hugely

increasing his remit.

Will be in a position to issue third Interim Report within the next week and

will be seeking more representations on that. Final report to be delivered in

May 2010.

Questions to Liam Byrne and Sir John Chadwick:

Daniel Kawczynski:

Will you allow EMAG and interested parties to see the detailed

work of actuaries Towers Perrin?

[NB: Towers Perrin now Towers Watson, following merger with Watson Wyatt]

Sir John Chadwick:

This will be covered in the third report. There will be a lot of

detail. A panel of three external senior actuaries will peer review Towers Perrin and

the final report will be accompanied by a report from Towers Perrin. It is for the

government to decide what is published.

Susan Kramer:

Following that: will your report contain conclusions or sufficient


Sir John Chadwick:

I will set out my assumptions with figures and results. The raw

data belongs to Equitable Life. I am anxious not to have a delay from the actuaries.

David Davis:

The key issue is transparency. If Sir John’s report is accepted, how

long will it be until payment? There are 15 policy-holders a day dying.

Liam Byrne:

It hinges on the conclusions of the report, such as: how many people

are involved, what the nature of the recommendation is (eg. cash or a pension

product); the scale of the task. Depending on these conclusions we need to make a

decision on a delivery partner. The Department of Work and Pensions (DWP) has the

skills and does a good job but if particular skills are needed it could be outsourced.

Until the final report we can only do preparatory work. We will parallel track, because

this is one of the largest compensation schemes ever and we don’t want the Whitehall

procurement process to add a few months.

David Davis:

But there’s the misery of uncertainty. Give us your widest assumption.

Liam Byrne:

I don’t want to lead you up the garden path. I’m not going to create a

timetable I can’t deliver.

[5B: hereafter, questions are asked in batches of two or three]

Alan Duncan:

I have constituents who are elderly and poor. An interim payment

would allow them to live. There are 15 policy-holders a day dying. Why have you

delayed so long?

Sir Patrick Cormack:

What about those who have died?

Vince Cable:

What about the suggestion of an interim payment to WPAs?

Liam Byrne:

It would be hard to set down what is a fair interim payout. It would

have to be one without the possibility of a claw back or repayment for overpayment.

The government would have to set an overall cap so there wasn’t a blank cheque

system. There is a strong case for those who have died. Once a scheme has been set

up and payments are rolling, then WPAs could be prioritised in the queue.

Sir John Chadwick:

We did look at interim payments in November 2009. It would

have to have been confined to WPAs but you need so many assumptions. Where we

are now, it would be a diversion of resources.

Richard Taylor:

I’m getting fewer letters. I think it’s because they’re dying or

they’ve lost faith in us. Can the two top parties agree to commit to implementation of

delivery after the election?

John Barrett:

It’s not just the delaying. I want to hear from the minister about means

testing. That’s not fairness and justice.

Anne Main:

What happens during the election – will it be held in purdah?

Liam Byrne:

The intention is to proceed and issue a response within a fortnight after

the delivery of the final report. We’re getting in senior advisers now. As for means

testing, I’ve thought a lot about this and maybe in these circumstances it is not just or


Sir John Chadwick:

I refuse to consider means testing.

5icholas Winterton:

Did I hear the minister correctly about Estates receiving

money? Please confirm this.

Oliver Heald:

Are there any groups you’ve concluded should not be in the scheme?

Steve Webb:

What is roughly the scale of compensation? Can you give us an


Liam Byrne:

The Government agrees there is a strong case for Estates.

Sir John Chadwick:

For Estates it is easy – you simply take the date of death to

establish their loss. The scheme will only apply to with-profits policies and only to

those who have suffered a loss. Some have not. All with-profits policies will be

eligible, but only if they’ve suffered a loss. I will not be proposing it is going to cost

£x million. This is a matter for the government. I will be explaining how losses should

be assessed. There will be a need to process raw data but what comes out the other

end is not my concern.

Gordon Banks:

How long will the process take?

Derek Wyatt:

What are the rules of purdah?

Douglas Hogg:

How do you apportion joint and several liabilities and the loss

attributable to the regulator?

Liam Byrne:

There is no long-stop date. The last date for the election is 3 June 2010.

If the report from Sir John arrives at the end of May then the government will respond

by mid June.

Sir John Chadwick:

Establishing proportionate responsibility is very difficult. There

are two aspects. First, after 1

st May 1999 when there are findings by the Ombudsman.

The regulators and the auditors may be in the frame.

In relation to the Society there could be apportionment only if you could show that the

Society was supplying disingenuous data to the regulators – such as the Reinsurance

treaty. The Treasury has raised a second such issue in January relating to the GAR

reserves. I am not persuaded that mismanagement by the Society itself gives rise to

apportionment. It was not the job of the regulators to manage the company.

There is real difficulty in measuring relative loss compared to other companies. How

much loss would have happened anyway?

I’m not applying Joint and Several Liability. This is covered in my first Interim

Report. I’m not engaged in a quasi-judicial process and I’m not recommending Joint

and Several Liability.

Cheryl Gillan:

Is means testing ruled out, and when was this decided? Approaching

this another way, what advice have you received from Treasury officials as to when

payment is deliverable?

Bob Walter:

What about those with Guaranteed Investment Return (GIR)

policyholders? Are they included as they are with-profits?

Tim Boswell:

Are you considering the ramifications of ‘de minimis’ levels? There

will be high administration costs and there is no point in spending a pound to pay a


Liam Byrne:

Advice from officials is that it depends on scheme rules. I cannot

pronounce categorically on means testing. I cannot see it happening but I can’t rule it

out. De minimis is an interesting point that will have to be considered. Certainly the

total will have to be capped.

Sir John Chadwick:

On GIR policies, they would be within the ‘with profits’


Liam Byrne and Sir John Chadwick leave.

Daniel Kawczynski asks Chris Wiscarson to address the meeting as Chief

Executive of Equitable Life.

Chris Wiscarson’s address:

Thanked EMAG for the work they are doing. He stressed he comes ‘with

humility’ to his new role.

Argued ten years is too long for a project like this to have been going on.

When the industry was required to correct pensions misselling, the FSA

required a much shorter timeframe.

Said he has met with Sir John and found him to be alert to the issues and his

observations penetrating. His flexible approach is a breath of fresh air.

Not everyone will be happy with the final scheme, whatever the outcome, but

simplicity and transparency are essential so that people can understand it –

even if they are disappointed with the numbers. MPs will need to be able to

explain the scheme to constituents. To propose that there will be peer review

of Towers Watson by three other actuaries is not obviously going to lead to


Argued that it will take months not weeks to get a scheme running.

Offered to meet any MPs to explain what Equitable is doing.

Has not met Liam Byrne. Has written to him personally has had no reply.

Daniel Kawczynski, Fabian Hamilton and Susan Kramer all agreed that they would

write as an APPG to the minister in order to request he meet with Chris Wiscarson.

Questions to Chris Wiscarson:

Steve Webb:

Is the data sitting there or does lots of work need to be done?

Chris Wiscarson

: The important thing is that an up-to-date address file is needed.

On this we’re working co-operatively with EMAG. There is also a problem that some

electronic data is not available before 1997. However, my primary concern is not the

data. The important thing is to get the algorithms right and for them to be able to be

understood. The idea of a different comparator for each year is not practical.

Anne Main:

What will happen during the election?

Chris Wiscarson:

Sir John Chadwick can continue grappling. But he could be asked

to do his work earlier. In my experience, having a deadline tends to focus delivery.

The absence of a date is not sensible.

John 5ewman:

This could be being done non-sequentially. This has been going on

for more than a year and the with-profits annuitant work could have been being done

in parallel. For the with-profits annuitants the alternatives are a no brainer: Either the

Pru or a conventional annuity.

Deloittes has only just been appointed to report on a method of identifying cases and

how you go about locating individuals who may be eligible.

Daniel Kawczynski said a Written Parliamentary Question will be tabled about

an interim payment for WPAs.

Jeremy Wright:

You say Equitable has been doing other things by way of financial

assistance. What are they?

Chris Wiscarson:

We’re controlling the cost base. We’ve created an extra £100m

which will be retained within the fund for policyholders through reducing admin. We

look after £5.5bn and are evaluating how that is best invested.

Andrew Mellor:

You criticised the proposed dates and want it reported quickly but

that would result in rushing the work and heightening the likelihood of another

Judicial Review. It needs thoroughness.

Chris Wiscarson:

Sir John hasn’t been set an end date. We need a timetable for

implementation and we need the work on the database now.

Daniel Kawczynski said a Written Parliamentary Question will be tabled about

about cleaning the database.

Susan Kramer:

The devil will be in the detail. What sufferers really want to know is

‘when and will I be eligible’? The process of grinding through this looks like it will

drag out.

We should press to have to sourcing of addresses being put in hand now and Sir John

should commit to publishing ALL the actuarial detail early on without waiting for the

final report.

Daniel Kawczynski said officers of the group will write to the Minister expressing dissatisfaction that he has not met with Chris Wiscarson.

Paul Braithwaite:

EMAG is alarmed by the lack of transparency over the actuarial

detail and by the ‘peer review by actuaries’. EMAG needs to see the actuarial advice

now so it can assess and respond to it.

Daniel Kawczynski and Fabian Hamilton brought the meeting to a close.


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