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Taxpayer Hit Again

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Strewth.

http://www.dailymail.co.uk/news/article-1320999/The-1-5bn-Equitable-Life-victory-Triumph-Mails-campaign-million-victims-payouts-times-big-expected.html

The Daily Mail says that the Equitable Life payout by the taxpayer is going to be three times as large as first thought.

My thoughts are why is there any payout at all? When you invest in something, you take a risk. If you win, fair enough. If you lose, you gotta take your losses. It doesnt work any other way. I mean, why cant all those punters get their money back from the taxpayer when they lose on the horses?

Equitable Life was the victim of a stupid promise to 'guaranteed' annuity holders. Easy enough to miss when inflation was chronically high. In hindisight it seems a silly thing to do, at the time you probably wouldnt have noticed it. Then the Law Lords showed that they were little better than a troop of monkeys, insisisting that these 'guaranteed' annuity holders were paid in full, when clearly the Equitable Life was bankrupt and should have been dealt with by rolling back any liabilities it had evenly across policy holders. That would have been the only fair solution.

Then Ann Abrahams, a woman who is clearly the stuff of mumsnet legend, decided that it was the fault of a lot of people who had absolutely nothing to do with it, namely the Taxpayer. The precedent set by this decision is clearly disastrous. The precedent basically says that if the thing that is being regulated by a few government officials goes wrong and someone somewhere takes a loss, then the taxpayer picks up the tab. The moral hazard on this greater than the SMI fiasco.

It doesnt look good for the solvency of the state if this sort of buffoonery is infecting the coalition so early in their term. We have yet to have any cuts of significance, but on the spending side we have had the changes to pensions, the Nick Clegg poor kids handout, and now this. It is starting to look like we would have been better off keeping new Labour.

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Strewth.

http://www.dailymail.co.uk/news/article-1320999/The-1-5bn-Equitable-Life-victory-Triumph-Mails-campaign-million-victims-payouts-times-big-expected.html

The Daily Mail says that the Equitable Life payout by the taxpayer is going to be three times as large as first thought.

My thoughts are why is there any payout at all? When you invest in something, you take a risk. If you win, fair enough. If you lose, you gotta take your losses. It doesnt work any other way. I mean, why cant all those punters get their money back from the taxpayer when they lose on the horses?

Equitable Life was the victim of a stupid promise to 'guaranteed' annuity holders. Easy enough to miss when inflation was chronically high. In hindisight it seems a silly thing to do, at the time you probably wouldnt have noticed it. Then the Law Lords showed that they were little better than a troop of monkeys, insisisting that these 'guaranteed' annuity holders were paid in full, when clearly the Equitable Life was bankrupt and should have been dealt with by rolling back any liabilities it had evenly across policy holders. That would have been the only fair solution.

Then Ann Abrahams, a woman who is clearly the stuff of mumsnet legend, decided that it was the fault of a lot of people who had absolutely nothing to do with it, namely the Taxpayer. The precedent set by this decision is clearly disastrous. The precedent basically says that if the thing that is being regulated by a few government officials goes wrong and someone somewhere takes a loss, then the taxpayer picks up the tab. The moral hazard on this greater than the SMI fiasco.

It doesnt look good for the solvency of the state if this sort of buffoonery is infecting the coalition so early in their term. We have yet to have any cuts of significance, but on the spending side we have had the changes to pensions, the Nick Clegg poor kids handout, and now this. It is starting to look like we would have been better off keeping new Labour.

Probably that the "victims" are all likely to be Mail reading Coalitionites who deserve help.Not like those on £12k a year and with no pensions.

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I agree. The problem is that the populace has been completely brainwashed over 60+ years from being hard-pressed people who battled all the way to f*ckwits who think "they're worth it", and if anyone tries to explain simple principles like you've just done they get shouted down.

Bearing the consequences for bad decisions is the only way, and none of these institutions should have survived. It's beyond belief to me that shareholders in any of the failed financial institutions were not wiped out.

Edited by bogbrush

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With Equitable Life though it is not a straight forward case of people invested, took a gamble and lost. The Government bodies that were supposed to keep an eye on what was happening failed to carry out their duties. Due to this Governmental failure policyholders were not infomed of what was going on and so lost the opportunity to decide whether to cut their losses and withdraw from Equitable Life or take a gamble and stick with them.

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I think AlfieMoon is right. I forget the details but I'm pretty sure there was a clear failure of the government to perform a duty to which they had committed themselves. Much as I dislike bailouts, I always felt this one was in fact justified (and remember that unlike the banks, this is a bailout of individual investors, not the institution.)

Anyone remember the details?

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I have listened through a discussion about it once a long time ago and it is something to do with some leaflet the govt put out encouraging take up of it - or something like that... too long ago for me to recall exactly... so govt was complicit in encouraging people to take it up.

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Maybe we owe them a debt of gratitude as they set the alarm bells ringing that all wasnt right in UK PLC so Labour were able to address the problems very early saving us from armageddon

Oh wait a minute

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Strewth.

http://www.dailymail...g-expected.html

The Daily Mail says that the Equitable Life payout by the taxpayer is going to be three times as large as first thought.

My thoughts are why is there any payout at all? When you invest in something, you take a risk. If you win, fair enough. If you lose, you gotta take your losses. It doesnt work any other way. I mean, why cant all those punters get their money back from the taxpayer when they lose on the horses?

Equitable Life was the victim of a stupid promise to 'guaranteed' annuity holders. Easy enough to miss when inflation was chronically high. In hindisight it seems a silly thing to do, at the time you probably wouldnt have noticed it. Then the Law Lords showed that they were little better than a troop of monkeys, insisisting that these 'guaranteed' annuity holders were paid in full, when clearly the Equitable Life was bankrupt and should have been dealt with by rolling back any liabilities it had evenly across policy holders. That would have been the only fair solution.

Then Ann Abrahams, a woman who is clearly the stuff of mumsnet legend, decided that it was the fault of a lot of people who had absolutely nothing to do with it, namely the Taxpayer. The precedent set by this decision is clearly disastrous. The precedent basically says that if the thing that is being regulated by a few government officials goes wrong and someone somewhere takes a loss, then the taxpayer picks up the tab. The moral hazard on this greater than the SMI fiasco.

It doesnt look good for the solvency of the state if this sort of buffoonery is infecting the coalition so early in their term. We have yet to have any cuts of significance, but on the spending side we have had the changes to pensions, the Nick Clegg poor kids handout, and now this. It is starting to look like we would have been better off keeping new Labour.

If this is the case then every financial institution needs to be locked down under the same rules and regulations and offer exactly the same product under the same terms.

The only way they can differentiate is by taking more or less commissions and charges (which would be a spiral to the lowest common denominator)

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I have listened through a discussion about it once a long time ago and it is something to do with some leaflet the govt put out encouraging take up of it - or something like that... too long ago for me to recall exactly... so govt was complicit in encouraging people to take it up.

If that's the case the bill should be footed by the party in power at the time. It was their advice, their short termism they should get the bill.

No moral hazard for political decisions the taxpayer just gets to pick up the unlimited tab.

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I agree. The problem is that the populace has been completely brainwashed over 60+ years from being hard-pressed people who battled all the way to f*ckwits who think "they're worth it", and if anyone tries to explain simple principles like you've just done they get shouted down.

Bearing the consequences for bad decisions is the only way, and none of these institutions should have survived. It's beyond belief to me that shareholders in any of the failed financial institutions were not wiped out.

Well you should believe and realise WHO runs our country behind the scenes, sucking the real created wealth out of the economy like vampiric parasites - just like loads of 'nutters'/hatters have been warning the blind/non-hearing population for eons!

Edited by erranta

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I agree. The problem is that the populace has been completely brainwashed over 60+ years from being hard-pressed people who battled all the way to f*ckwits who think "they're worth it", and if anyone tries to explain simple principles like you've just done they get shouted down.

Bearing the consequences for bad decisions is the only way, and none of these institutions should have survived. It's beyond belief to me that shareholders in any of the failed financial institutions were not wiped out.

A ven digram of "equitable Life" pension holders and 'Mail readers would overlap a lot. These are the very eople who would describe themselves as hard working, independent and looking to the state for nanny state for nothing..except easy profits on public utility sales in the eighties and now a bail out for their misguided investment. As is said elsewhere on this thread these people really do think they are more deserving than someone earning 12k or an unemployed person having to claim IS.

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just listening to an item on this on Moneybox live (sad I know) and it seems the offer of 1.25bn (or about that) is not acceptable to the supposrt group who want the whole 5bn plus that some adjudicator decided this is fair payout for what they would have received if they had not stayed in Equitable Life and gone to some other company.

Now I suspect this judgement was made some years ago when the economy was hitting the stratosphere (or so we were told) I would be interested to know what a similar judgement would be now. Everyone has lost on savings, pensions annuities over the last few tears - not everyone gets to be bailed out by the good old taxpayer. Sheer greed by the sound of it. Not to say they don't deserve some help.

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From the Daily Telegraph article:

"Ms Abraham's independent report, however, is seen as the most important publication as it has been within her remit to make recommendations.

Her call for the Government to establish and pay for a compensation scheme "to put those people who have suffered a relative loss back into the position that they would have been in, had maladministration not occurred" will be difficult to ignore. The report looked into the roles of the public bodies which regulated Equitable Life up to December 1, 2001.

They were the former Department of Trade and Industry (DTI), Government Actuary's Department (GAD), and Financial Services Authority (FSA), acting on behalf of the Treasury. It has made 10 "determinations of maladministration": one against the DTI, four against GAD, and five against the FSA. The Ombudsman found that these led to injustice on five counts. "My findings show the prudential regulation of the society during the relevant period failed - and failed comprehensively," Ms Abraham says.

The report finds that "serial regulatory failure" occurred as the bodies regulating Equitable Life undertook that regulation in a "passive, reactive, and complacent" manner. It cites examples, such as how Roy Ranson had been allowed to hold simultaneously the roles both of chief executive and appointed actuary for Equitable Life for more than six years, "thus neutralising the ability of the regulators to rely on the appointed actuary, who held a central role as a 'whistle-blower' in the system of prudential regulation."

Regulators are also criticised for failing to question or seek to resolve issues in Equitable Life's regulatory returns, permitting misleading information on the society and failing to identify the problems. "Practices which should have raised questions in the minds of prudential regulators, acting reasonably, went undetected or were left unchallenged," she says. "When giving information to the society's policyholders and to others about the situation Equitable was in, the FSA provided information which was inaccurate and misleading."

The £5bn would not cover the policy holders full losses but rather the amount attributed to the failures of Governmental regulatory and administrative bodies.

The £1.5bn they are talking about would be paid out to 1 million policy holders - not exactly much is it (not much more than just some small change) compared to their actual losses incurred due to the imcompetence of the Government.

Edited by Alfie Moon

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A couple of decades ago, my wife, a nurse, wanted to pay more into her pension. The official NHS vehicle was an AVC with Equitable life, there was no other "approved" way.

Guess what? She lost a fair bit of money on the deal. Is it right that people prepared to provide for themselves should be at risk from government-sponsored schemes?

A comment on the guardian website says it all

Well then we have to agree to disagree. I do not believe in arguing till the kingdom come with anyone who disregard facts. Had these Policy holders been reckless and invested in a fly by night operator, a wild west adventurer or even a hedge fund your position would have been sound. But not in this case.

For the record,

The Regulators were paid and sustained by the policy holders under the Government regulations. They not only failed their duties but went an extra mile to give the policy holders knowingly false assurance. If that does not give liability, I do not know what else would. So while the Policyholders were given words of comfort that the Society was safe FSA jolly well knew they were not telling the truth.

Add to the the Government's guarantee, to all policy holders, of at least 90% of their funds if an insurer failed. Equitable Life in effect failed but the treasury reneged its promise on the spurious ground that the Society was continuing after is imposed penal surcharges on all its policy holders.

Compare the behaviour of the government against what they did for the interest rate tarts who invested in dodgy banks. They were fully reimbursed and after the banking crisis the limit of their guarantee was increased.

The only difference is Mr Browns antipathy to the prudent and those who save for a better retirement instead of spending their retirement in penury dependent on the Government handout.

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A couple of decades ago, my wife, a nurse, wanted to pay more into her pension. The official NHS vehicle was an AVC with Equitable life, there was no other "approved" way.

Guess what? She lost a fair bit of money on the deal. Is it right that people prepared to provide for themselves should be at risk from government-sponsored schemes?

A comment on the guardian website says it all

These people were foolish.I never trusted any advice from anyone,didn't put a penny into a pension fund and managed my own pot which I can have any time I like.It's funny how they run to nanny state for a handout when they disapprove so strongly.

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A couple of decades ago, my wife, a nurse, wanted to pay more into her pension. The official NHS vehicle was an AVC with Equitable life, there was no other "approved" way.

Guess what? She lost a fair bit of money on the deal. Is it right that people prepared to provide for themselves should be at risk from government-sponsored schemes?

A comment on the guardian website says it all

Government sponsored scheme?

Did Mr Joe Six Pack in the street realise he was on the hook for this? Mr J6P wasnt told anything about this as far as I can recall.

If anyone should be paying for this mess, it should be the individuals who gave the bad advice, and the directors of Equitable Life who led the society to bankruptcy, plus the judges who made that mad decision in the House of Lords.

The one group that should not bear any of these losses, is the taxpayer. The scheme was not guaranteed by the taxpayer. If I had said that you were guaranteeing something, and whatever it was went wrong, and then someone came to you for payback, how would you feel? You would rightly say that you knew nothing about it and seek resolution elsewhere.

This is exactly what has happened here. The Taxpayer never guaranteed this scheme, and therefore shouldnt have to pay a penny. Government regulation should be best endeavours only, and any failure, which will occur from time to time, humans being what they are, and the costs of failure must be borne by the investors. Open ended liabilities such as this will eventually collapse the state if those in charge do not have the wisdom to close down such avenues of compensation.

Bottom line, if you invest, you must take the risk. Only where the government specifically underwrites a risk, should there be any restitution from the taxpayer if things go wrong.

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These people were foolish.I never trusted any advice from anyone,didn't put a penny into a pension fund and managed my own pot which I can have any time I like.It's funny how they run to nanny state for a handout when they disapprove so strongly.

You didn't read what I said. It's all that was on offer, take it or leave it, it was the only way to add small additional contributions to her NHS scheme whilst using the remainder of her tax-free pension allowance. No foolishness required, anyway, Equitable Life were still pumping out material (endorsed by the FSA) that promised good returns and making great play of their security, as were all the pension providers.

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@AlfieMoon

Thanks for the link. It actually seems to me that the case for government bailout is less clearcut than I had thought.

Don't really know which side I'm on now!

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These people were foolish.I never trusted any advice from anyone,didn't put a penny into a pension fund and managed my own pot which I can have any time I like.It's funny how they run to nanny state for a handout when they disapprove so strongly.

You really can't blame people becoming btl landlords at least they stand or die by their own decisions. when you see programs like panorama exposing the pension industry and the 80% cut that some pension company's take. I think the city square mile is just a den of thieves.

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Government sponsored scheme?

Did Mr Joe Six Pack in the street realise he was on the hook for this? Mr J6P wasnt told anything about this as far as I can recall.

If anyone should be paying for this mess, it should be the individuals who gave the bad advice, and the directors of Equitable Life who led the society to bankruptcy, plus the judges who made that mad decision in the House of Lords.

The one group that should not bear any of these losses, is the taxpayer. The scheme was not guaranteed by the taxpayer. If I had said that you were guaranteeing something, and whatever it was went wrong, and then someone came to you for payback, how would you feel? You would rightly say that you knew nothing about it and seek resolution elsewhere.

This is exactly what has happened here. The Taxpayer never guaranteed this scheme, and therefore shouldnt have to pay a penny. Government regulation should be best endeavours only, and any failure, which will occur from time to time, humans being what they are, and the costs of failure must be borne by the investors. Open ended liabilities such as this will eventually collapse the state if those in charge do not have the wisdom to close down such avenues of compensation.

Bottom line, if you invest, you must take the risk. Only where the government specifically underwrites a risk, should there be any restitution from the taxpayer if things go wrong.

Government sponsored in that a government body (the NHS) used EL as the ONLY way for NHS staff to "top up" their pensions using their tax-free contribution allowance, and a government body (the FSA) was responsible for regulating EL. The fact that the chief auditor and the chief exec were the same bloke at EL for several years seems to have passed the FSA by. If the FSA are sued, who pays up? Let me guess....

I agree that the taxpayer shouldn't be on the hook for the losses, especially if the investors had free choice of where to go (although Northern Rock et al set a bad precedent here don't you think?). The real screw-up seems to be the court decision to honour the guaranteed annuity holders the expense of all the other fund holders. Equitable, that was not.

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Again from the Daily Telegraph report:

The report looked into the roles of the public bodies which regulated Equitable Life up to December 1, 2001.

They were the former Department of Trade and Industry (DTI), Government Actuary's Department (GAD), and Financial Services Authority (FSA), acting on behalf of the Treasury. It has made 10 "determinations of maladministration": one against the DTI, four against GAD, and five against the FSA. The Ombudsman found that these led to injustice on five counts. "My findings show the prudential regulation of the society during the relevant period failed - and failed comprehensively," Ms Abraham says.

Departments and organisations funded by and run for taxpayers failed in their duties in relation to Equitable Life. These failures led to EL policyholders losing the bulk of their pensions as a consequence. It was failure by public bodies which then justifies compensation coming from the public pot of money.

All the investigations in the UK and by the European Parliament identify these public bodies failing in their duties and these failures leading to unnecessary and avoidable losses by the EL policyholders.

If the situation was that people had invested in a pension company that just had the bad luck to lose out to economic conditions and bad choices and decisions, but all within the boundaries of regulations and rules then yes it would be a case of just tough luck on the policy holders - but that was not the case. They were led to believe by taxpayer funded organisations and Departments that their investments, whilst exposed to the will of market forces, etc., were otherwise safe. They were delioberately mislead and misinformed by taxpayer funded organisations that had the legal duty to check that EL were operating within the permitted rules, etc., but failed to carry out these duties - this is accepted as fact by all.

The policyholders are seeking compensation from the bodies/organisations that failed them. In this case it happens to be bodies/organisations that are funded by the taxpayer.

How about this being a case of moral hazard for taxpayer run organisations? If they fail in their duties, and you and other members of the public suffer financial and/or other consequences, you are saying that there should be no consequence for their failures. Seems rather like the Bankers being paid massive bonuses for failure.

Edited by Alfie Moon

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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