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From
Peter Butler
Email
pdbutler@ntlworld.com
Tel.
020 8466 6446
In
Bulletin 4 we published our Formal Complaint to the FSA
Complaints Commissioner Sir Anthony Holland on the unacceptable role of
the FSA in the introduction of the revised Rectification Scheme 2003.
Initially
the Commissioner rejected our submission unless we could provide evidence of
“misconduct” by the FSA and so we responded with the view that evidence of
“misconduct” existed in the Society’s explanatory booklet entitled
Rectification Scheme 2003 which included the following phrase
“Although
the scheme is not regulated by the FSA we have developed it in conjunction
with the FSA and we have taken account of their comments and suggestions. The
FSA have confirmed that they do not object to the scheme as it stands”
This
suggested that the FSA were pro active in the design of a scheme with watered
down benefits from the original Scheme.
The
Commissioner then decided that our Complaint did not fall within his remit and
suggested it be directed to the Financial Ombudsman and he published his
decision on his website on 24th April.( http://www.fscc.gov.uk/).
We
have therefore made a submission to Mr Walter Merricks the Financial Ombudsman
and await his response.
THE
SUBMISSION TO WALTER MERRICKS THE FINANCIAL OMBUDSMAN on 12th April
2005.
Mr
Walter Merricks
Chief
Ombudsman
Financial
Ombudsman Service
South
Quay Plaza
183
Marsh Wall
London
E14 9SR
12th
April 2005
Formal
Complaint on the Equitable Life Rectification Scheme 2003
Dear
Mr Merricks
I
am writing on behalf of a Working Party of Annuitants from ELTA
(Equitable Life Trapped Annuitants Association) on the recommendation of Sir
Anthony Holland the FSA Complaints Commissioner.
Our
Working Party was set up following many representations by email from With
Profits Annuitants who were awaiting reviews of their annuities under the
Society’s Rectification Schemes. The first of these was implemented by
the previous Board of the Society in 2001 to comply with the requirements of the
House of Lords Decision in the Hyman case, but after several years this scheme
was scrapped by the new Board and replaced with a watered down version named Rectification
Scheme 2003.
However
the original Rectification Scheme was the subject of an independent review as to
its fairness and compliance with the Hyman case decision by two eminent members
of the legal and actuarial professions. In replacing this scheme with
Rectification Scheme 2003 the new Board has not published any evidence of
independent expert scrutiny. Instead it appears to have relied upon anonymous
and unpublished “legal advice” and the enigmatic FSA comment that it “does
not object” – hardly wholehearted endorsements even were the FSA’s opinion
to carry the same level of authority as that of the previous professional
adjudicators.
The
Case Against Equitable Life
The
original Rectification Scheme had been properly set up- with advice and guidance
from Independent Professionals - to provide annuitants with the correct redress.
The revised scheme was published late in 2003 and offers began to roll out from
the spring of 2004.
At
that time we learned there around 17,000 cases still to be reviewed. These were
mainly with profits annuitants who initially subscribed into Equitable Pension
Policies with GAR rights but had chosen to acquire with profits annuities
instead of annuities with the Guaranteed Fixed Rates to which they were
entitled. There had been clearly a policy of persuading policyholders to opt for
the with profits annuities from 1994 onwards (when the dual bonus practice was
introduced) and the majority of the annuitants in our group say they had not
been aware of their rights to guaranteed annuities. This we believe to be
generally true with the majority of all annuitants who signed up to a contract
many years ago which included many pages of highly technical pensions type data
including tucked away on page 15 of the document a “Schedule of Guaranteed
Annuity Rates” It is also true that at the time of their annuity purchase
many annuitants had not been given correct information on their final bonus
entitlements and had therefore made annuity purchase decisions without full and
correct financial facts.
The
offers we have seen being made since the spring of 2004 have been couched in
opaque language without proper explanations of the calculations and requests for
further detailed clarification have frequently been met with a negative and
unsatisfactory response. We have therefore formed an impression that the Claims
Handling Organisation dealing with this Scheme does not have the detailed
information requested nor the necessary analytical skills to explain it.
In
scrapping the initial Scheme the current Board contend that it was “unfair”
to other policyholders but the argument of “fairness” was also used
by the previous Board in introducing the Dual Bonus Policy. However as we know
the House of Lords judged that “fairness” has to give way to legal
correctness and it most improper and unfair that the current Board are relying
upon anonymous legal advice to justify their action.
The
Case against the FSA
In
addition to the above case against the Society our complaint is also against the
FSA who as the regulatory authority have not only condoned this unsatisfactory
scheme but also according to the Society’s literature have been pro active in
its design. The evidence is in the Society’s explanatory booklet on the new
scheme, which includes the following statement
“Although
the scheme is not regulated by the FSA we have developed it in conjunction
with the FSA and we have taken account of their comments and suggestions. The
FSA have confirmed that they do not object to the scheme as it stands”
We
submit that the revised scheme does not provide annuitants with the correct
legal redress and following The Society’s refusal to discuss this with us,we
made representations to the FSA. These were rejected on grounds we found
unacceptable and so we then made a Formal Complaint about the role of the FSA in
this matter to the Complaints Commissioner Sir Anthony Holland a copy of which
is attached together with Sir Anthony’s Final Decision. We have been told that
a provisional date for publishing this on a website is 18th April.
In
essence Sir Anthony is saying that this complaint does not fall within his remit
but recommends that it should be addressed to the Financial Ombudsman Service.
Action
Required
The
FOS will already have received many complaints from distressed annuitants about
the inadequacy of the offers being made to them under the revised Rectification
Scheme together with their concern at being given a 28-day deadline to sign and
Acceptance Form giving up any further legal rights of claim. We believe that
more complaints will be sent in and that the pattern of these complaints will
reinforce our submission to you.
We
hope that these cases are ones that can be resolved with your help. Time is
running out for the many elderly annuitants who are now subject to stress and
unforeseen financial burdens.
Specifically
we request as a matter of great urgency that Equitable Life be directed to
comply with its obligation to provide each policyholder (within the
Rectification Scheme) a comparative statement showing
·
The
initial starting with profits annuity that he acquired, and
·
The
guaranteed annuity that he could have chosen if he had been given the correct
information at the time of annuity purchase
This
information could of course be amplified with supporting detail for the purposes
of clarification and it is lamentable that after 4 years the Society has not
found the will to do this.
The
annuitant should then be given a period of say 3 months to decide whether to
·
continue
with his current annuity or
·
replace his
annuity with The Society at the Guaranteed rates within his pension policy
All
of these calculations would of course require proper financial adjustment for
interest and tax.
The
issues we have raised are technical and complicated and we would be happy to
assist by attendance at a meeting for clarification discussions.
Yours
sincerely
Peter
D Butler
IN
CONCLUSION
We
understand that over the last 12 months a large percentage of the 17,000 review
cases have been completed, but there is still a backlog of some of the more
complicated cases outstanding.
Annuitants
who are dissatisfied with their offers have to register a “formal complaint”
which can eventually be submitted to the Financial Ombudsman. We do not know how
many cases have been submitted but we have been told that the FOS are “snowed
under” and struggling to deal with these cases. We hope therefore that our
representation to Mr Merricks can be cross referenced with those cases and
possibly assist in their resolution.
We
have also been told of instances where dissatisfied annuitants have been advised
by the Society to present their cases to the Pensions Ombudsman but far have not
been advised of any specific cases that have benefited from that activity so
far.
We
would welcome news of any cases that have received beneficial results from
submissions to the FOS or the Pensions Ombudsman.
With
best wishes from the Working Party
Peter Butler
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