The Equitable Life shakedown


This is a short message on the subject of the Equitable Life compensation affair.

I think there probably is such a thing as misselling of investments, for example, where grossly misleading claims are made. But such claims would need to be barefaced and wholly out of kilter with any sense of reality. Were an investment adviser to advise you a fund was likely to rise in value by a factor of ten in a year, that would certainly constitute misselling. If he were to advise you it would rise by 30%, and it in fact fell by 20%, that would be within the normal range of risk of investments.

However, even in cases where outrageous claims about investments are made by advisers, the priniciple of caveat emptor comes into play. Would a reasonable person believe that a fund might rise in value by a factor of ten in one year? Unless it could be shown a reasonable person would believe outrageous claims, even blatant “misselling” of this kind ought not to give rise to a legal action.

I am fed up of hearing Equitable Life investors claim they believed their investment could only go up. No reasonable person could think an investment could ever be “a dead cert”.

I would like all compensation claims with respect to Equitable Life to be cancelled. In future, such attempted shakedowns (whether of a company or the state) should be considered as attempted fraud and the investors prosecuted. People have to take responsibility for themselves. Their investments fell in value, but such is life–they have no reasonable claim against the company or the state. To read that HM Treasury is to pay £1.5bn out of general taxation to the investors is intolerable–don’t they realise the country is already indebted?

12 responses to “The Equitable Life shakedown

  1. You are overlooking the fact that the losses stemmed from a situation which did not exist when the policies were written. Equitable created policies with guaranteed returns and then tried to renege on them. When the courts said they couldn’t do this, they paid those with the guaranteed returns by taking money from those without guaranteed returns. Those with policies without guaranteed returns had no idea this would happen and hence could not take it into account.

    Private enterprise at its finest.

  2. I think that the problem comes from the axiom that NO “returns” can be guaranteed when governments start to interfere in (any) enterprises. At all.

    I think also of Gordon Brown, who robbed (directly, by force) at least £150 billion over ten years, from people’s pension funds, saying it was “taxes on windfall profits” (as though profit and loss is a lottery of some kind.)

    I also object, having been in advertising myself, to the tone of ads that said things like “Miss-sold a pension? THEY owe YOU!” Any private firm that appealed to hate and fear in this way, in its ads, directing visceral mob ire at some other people merely labelled as “they”, would find the State’s Lawyers sitting opposite themat 8.00 am the following morning, and they would have to make the best of it.

  3. Look Robert, even if the product was fraudulent and missold – they can only sue Equitable Life, if it still exists. There is no liability to the taxpayer. If Natwest collapses and my money disappears – true the UK runs a scheme where the first £50K is guaranteed – but beyond that, you’re stuffed. And yes, bank deposits are meant to be dead certs – the banks will tell you the money will definitely be there when you need it. The Equitable Life investors should just take it on the chin.

  4. ”People have to take responsibility for themselves.”

    This is the nub. People HATE to take responsibility for anything. They always need a fall back position of being able to blame some one else.

  5. When you go to the doctor you substantially put your life in his hands. Many people, especially those educated after WWI tend to do the same with other experts such as financial advisers.
    In many ways you are right, people have to look after themselves and not be stupid. Unfortunately a generation has been brainwashed to effectively ‘be stupid’ and to defer to “experts”.
    Individual freedom and individual responsibility is where it is at, indeed. But I’m afraid most people have been educated out of that and need to be guided, mercifully if possible, to freedom.
    My perception is that there is actually plenty to go around, and would be if it was not being sucked into greed unimaginable and brain-dead activities.
    We are all being conned to a terrible degree.

  6. dj – As a matter of legal fact, there is a liability to the taxpayer because companies offering financial products such as the opnes Equitable offered are licenced and regulated by the British state. You may disagree with the state doing it , but that was the position when the buyers made their purchase. They quite legitimately took this into account when makingt he purchase.

    Any really large private company by virtue of its size takes on aspects of a public corporation. It does this because it becomes too important to be ignored by Government. If Barclays Bank was in danger of going bust no British Government could allow it to liquidate because of the effect on general confidence, both national and international, in the British economy. To confidence may be added cases where very large job losses would result from a liquidation or a vital domestic industry would be severely damaged by a company’s failure.

    The implications of this for government are clear: they cannot simply stand back and ignore the behaviour of large private companies. That means governments should recognise that they may need to act to protect domestic industries – even in rare cases taking them over – domestic defence supplier, to place legal restrictions on what the company can do, for example by requiring export licences for eapons.

  7. Equitable Life was regulated by the FSA – which is just another quango designed to suck up taxes. I doubt there were many investors who took FSA regulation into account when investing. I used to work for the FSA, and I know that we used to get the occasional phone call by people asking about companies, and all we could say is “yes, they are a regulated company”. Look, anonymous, why should I pay through my taxes so that the Equitable Life shareholders can be compensated. It sets a dreadful precedent if nothing else.

    “If Barclays Bank was in danger of going bust no British Government could allow it to liquidate because of the effect on general confidence, both national and international, in the British economy.” – you are wrong there. The government could and should have allowed most British banks to go bust in the last recession. It could have led to results similar to the Argentine sovereign default, when things became bad for a few months and the economy ran on barter – but it quickly flushes debt out of the system and allows for a stronger recovery – a V shaped recovery, rather than the L shaped one we have now. I think what you mean to say is that vested interests would have been affected.

    “The implications of this for government are clear: they cannot simply stand back and ignore the behaviour of large private companies.” – they can and should. I favour a written constitution specifically banning bailouts.

  8. You are correct it is not the taxpayers´debt.
    Another example of the corruption inherent in limited liability.
    The individuals concerned should have breached their contract with the clients somewhere, and should be able to be held accountable.

  9. I work for the NHS and bought added years which were deducted from my salary and invested into Equitable Life by the NHS, surely as they invested my money they should take some responsibility for this loss.

  10. Eileen, if anyone owes you any money it is Equitable Life, not the NHS and not the UK taxpayer.

  11. Eileen, you choose to buy those pension years. You choose to invest your money in a pension scheme.

    You should take some responsibility for this loss.

  12. susie hedges

    Get a life…! xx