The Parliamentary Ombudsman weighed into the row about compensation for victims of the Equitable Life scandal yesterday, saying she could not support the findings of a Government-backed inquiry published last week.
Ann Abraham said that proposals in Sir John Chadwick's report, to which the Government has lent its support, "seem to me to be an unsafe and unsound basis on which to proceed". The Chadwick report recommended the total compensation on offer should be capped at a maximum of £500m – about a tenth of the amount claimed by Equitable savers who saw the value of their private pension policies slashed after the insurer came close to collapse in 2000 when it lost a legal battle over pension guarantees. About 1.5 million Policyholders who had paid into the scheme lost up to £4.8bn.
In 2008, the Ombudsman reported on her own investigation into the scandal, blaming maladministration stemming from "serial regulatory failure", and recommending that policyholders should be fully compensated for their relative losses.
Ms Abraham said later that the previous Government's response to her report did not go far enough to "address the injustice suffered by Equitable Life policyholders".
In a letter to MPs yesterday, Ms Abrahams said the terms of reference for Sir John's inquiry were no longer relevant. "[They] included the rejection or qualification by the pervious Government of many of my findings ... and the rejection of my recommendation," she added. "In the light of the new Government's commitment to implement that recommendation in full, the Chadwick report has thus been overtaken by events and cannot provide a basis for the implementation of my recommendation."
In May, the coalition signalled its intention to implement the Ombudsman's recommendations and plans were included in the Queen's Speech. Last week, the Financial Secretary to the Treasury, Mark Hoban, said the Chadwick report was one of a number of "building blocks" in the attempt to resolve the situation, adding that compensation levels for savers would be disclosed in October.
The Equitable Life Members' Action Group has accused the Government of trying to limit payouts. Ms Abraham said she backed a number of the Government's proposals for managing compensation payments but rounded on the details of the report which, she said, "if acted upon, would not in any sense enable fair and transparent compensation to be delivered".
Sir John's report was commissioned by the previous Labour government, which apologised for the maladministration that contributed to the insurer's problems, but rejected the recommendation that it should compensate every policyholder.
Ms Abrahams' comments follow criticism from the chief executive of Equitable Life, Chris Wiscarson, who said last week: "We cannot support the conclusions of a report which has objectives that appear to us quite different from what was anticipated by the Parliamentary Ombudsman."
Mr Wiscarson added that the £4.8bn figure should be the basis for compensation.Reuse content