Letter from Mr Stephen J Suttle
I understand that the Select Committee is taking
evidence from representatives of Equitable Life on 15 February.
No doubt you are being deluged with correspondence from the public
about this matter; but I would would like to draw to your attention
one feature of it which causes me particular concern.
In a circular letter to policy-holders dated
1 February 2000 and signed by its Managing Director and Actuary
(pp 1-2 of the attached bundle)[not printed] the Society stated
"contrary to many of the reports which have
appeared in the press, there would be no significant costs imposed
on the Society if the Court of Appeal's decision were upheld in
the House of Lords. The speculation regarding financial difficulties
and costs to be borne by with profits policyholders is therefore
unfounded. Your Society remains, and will continue to remain,
In fact, of course, the upholding of the Court
of Appeal's judgement by the House of Lords has resulted in a
shortfall of at least £1.5 billion and potentially much more
unless the Society succeeds in capping the liability to guaranteed
annuity rate policyholders.
Had the Society's letter revealed the true position,
no prudent policyholders would have risked committing further
funds to the Society, whether or not their policies contained
guaranteed annuity rates (as I subsequently discovered mine did).
As it is, however, thousands of policyholders
must have relied on the worthless assurances contained in the
Society's letter in paying substantial further contributions to
the Society between February and July last year, only to learn,
when the true extent of the exposure emerged, that they would
get no growth at all for the first seven months of last year and
that the Society's future was holed below the waterline.
When I wrote to the Society on 24 July 2000
to protest about this (pp 3-4 [not printed]), the Society's reponse
on 27 July (pp 5-6) [not printed] was that, "The House of
Lords ruling is crucially different [from the Court of Appeal]
and has changed the position." This reflects the repeated
assertions made on behalf of the Society that the House of Lords
"moved the goalposts".
That stance is far from the whole story. The
position is that the House of Lords upheld the approach in the
Court of Appeal of the senior of the two majority judges, the
Master of the Rolls Lord Woolf (set out in the judgment of the
House of Lords) and did not accept the less draconian approach
suggested by the other majority judge (Waller LJ) and described
as the "ring-fencing issue".
What the Society's circular letter of 1 February
2000 should therefore have said was,
". . .there would be no significant costs
imposed on the Society if the Court of Appeal's decision was upheld
in the House of Lords, provided that the House of Lords also approve
the "ring-fencing" approach suggested by Waller LJ.
If however the House of Lords uphold the Court of Appeal decision
on the basis suggested by the most senior judge, Lord Woolf, the
exposure will be at least £1.5 billion and the Society will
not have sufficient orphan assets to cover that exposure."
I would be grateful if it could be put to the
Society's representatives on 15 February that for the Society
to have written to policyholders in the terms it did on 1 February
2000 was grossly misleading and irresponsible.
9 February 2001