Troubled UK life assurance company Equitable Life is now faced with an
additional challenge from its international policy-holders. Like many
of its competitors, Equitable established offshore branches to sell tax-efficient
pensions and savings policies, and these policy-holders say they should
not be penalised in the same way as on-shore savers, who have been docked
16% of the value of their policies. About 33,500 Equitable policies are
held in Guernsey, Dubai, the Irish Republic and Germany.
The Guernsey Financial Services Commission, which regulates Equitable’s
international business, has asked law firm Norton Rose to “examine
a number of concerns” about Equitable’s Guernsey-based operation.
Norton Rose will establish if international policyholders’ cash should
be treated separately from Equitable’s UK life fund. It's not clear
at present whether there is a de facto separation between the two pots
of money, which is not impossible given that Equitable was separately
regulated in Guernsey.
The Equitable Members’ Action Group (EMAG) has written to Vanni Treves, Equitable's Chairman, calling for international policyholders to be treated separately to UK members, and saying they should escape liability for the guaranteed pension policies which have caused problems for onshore policy-holders, since none of the international policies was sold with guarantees.
The review complicates Equitable's efforts to forge a compromise deal with holders of guaranteed pension policies to cap the society’s liabilities. No deal can be constructed in any event until Nicholas Warren, QC, publishes his opinion on whether policyholders can claim compensation for mis-selling. Even if this report is positive for Equitable, an action by offshore policy-holders could hold up a final resolution for months or even years, leaving onshore policy-holders in doubt about the value of their pensions.
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