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Equitable Life

I thank the right hon. Gentleman for that intervention. I will go on to talk about the regulatory failure and why I think that there should be a proper compensation scheme. I hope that I will cover some of the points that he rightly raised. The conclusion of the parliamentary ombudsman's report of 5 May stated:""In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied."" I said earlier that I would highlight some of the many cases that have been brought to my attention by my constituents, and I am sure that we could all raise such cases. The majority of the public, who have had no contact with or money invested in Equitable Life, would be forgiven for thinking that only those who had considerable investment in the company have lost out over recent years. The reality is different, as the examples will show. I have protected the names of my constituents by using initials. Mrs. H of north Leeds told me that her modest £200 a month income was reduced overnight to less than £100 a month, although it is now back up to about £120. She is 83 and was completely dependent on that £200 a month. When it was reduced by more than half, she found it hard to cope financially. It was only the help of her ex-husband that kept her going. She still struggles every month because of the continued shortfall in her income. At the other end of the scale, Mr. A is a retired solicitor who started investing in a pension policy with Equitable Life in his mid-30s. Given the record of the company and the projections for growth over succeeding years, that would have given him a fund large enough to pay a substantial income from the annuity that he would have started aged 65. He is now 61. Not only has he seen no growth in his fund over the past few years, but the annuity he was guaranteed is no longer possible. He lost out twice: first, when his investment failed to reach its promised level and, secondly, when he discovered that the guaranteed annuity rate had been abolished. The fund was far lower than he had planned. Mr. A provided the following example. Say he had invested a total of £100,000 in 1997. According to Equitable Life's plan, that sum should have grown to about £133,000 by 2000. However, because the society had frozen all investments by that time, his fund would have remained at £100,000. In order to halt the reduction in the value of his investment, Mr. A decided to move the fund to another company and paid a penalty of £20,000 for the privilege. That is a high penalty, but is sadly not uncommon in the industry. In 1997 he had an investment of £100,000, which he could have reasonably believed would have helped to provide part of an annuity that would have guaranteed him a good pension income. Three years later, he had only £80,000 to invest—a loss of £53,000 compared with what he might have expected, or a reduction of just under 40 per cent. in the value of his fund. Dr. C is a retired consultant who lost more than £25,000 after investing £100,000 in Equitable Life. He spread his investments carefully, so although he is angry at his loss, he has not been left destitute. However, he blames the regulatory regime that allowed this to happen in the first place.