Sam Dunn: Another nail in the coffin of the savings industry

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The Independent Online

The mutual insurer came close to collapse in 2000 after failing to meet its full pension commitments, and has since spent years trying to absolve itself. In the process, it sued its former auditor, Ernst & Young, for negligence over the black hole in its accounts that left it unable to honour its promises to its customers. Now, finally, it has decided to give up the ghost and drop the multi-million-pound claim against E&Y.

There are complex legal reasons behind its decision, making it difficult to know whether it was justified or not. But one thing is certain: this latest news is another blow to the reputation of Equitable Life, and the very last thing its policyholders needed. Equitable's exit from the High Court leaves those seeking compensation for their reduced pensions with one less option for financial redress.

The insurer does have an outstanding claim (for now, at least) against its former directors that could, potentially, claw back some cash for its policyholders. But most of the old board don't have deep pockets.

The Parliamentary Ombudsman is currently looking at the role played by the Government in the run-up to Equitable's fall. Its investigation is due to be concluded by the end of this year.

And, in Europe, a group of MEPs has just backed a campaign by the Equitable Members Action Group to set up a committee to examine the insurer's behaviour. But sadly, these people may be chasing little more than shadows as they try to win compensation.

While Equitable's policyholders deserve our sympathy, the shambles has far wider implications, continuing to spread a chill throughout the financial services industry.

Never has there been such a disincentive to put money aside for a pension. The facts speak for themselves: one of the most trusted names in the business slashed pension payouts to hundreds of thousands of savers after failing to make provision to honour their policies.

Getting people to invest in a pension is hard enough, but it's doubly difficult when the company running the money for you can get into such trouble.

Time to act on PPI

Millions of us have, at one time or another, bought payment protection insurance. It's the cover flogged with personal loans, credit cards and home loans to safeguard our repayments in case of illness, unemployment or accidents.

Now, new interest is being generated in the product - the sort its purveyors certainly won't welcome. In fact, this type of insurance is seriously flawed - riddled with exclusions and often sold to people who could never claim on it. As a result, it faces a squeeze from the City regulator, the Financial Services Authority, and is already being investigated by the Office of Fair Trading.

The FSA's full report on its inquiry isn't published until November. But in the meantime it has revealed that while PPI linked to mortgages is often correctly sold, other parts of the financial services industry are making "very poor" efforts to see that standards are adhered to.

If bad practice continues, the FSA warns that extra regulation or a referral to the Competition Commission may be necessary. However, it would prefer that the industry put its own house in order. Fat chance: it may as well get its officers on the case now.

s.dunn@independent.co.uk

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