Michael Palau ' former intermediary Dear Sir One has to admire the ability of lawyers to create...
Michael Palau ' former intermediary
One has to admire the ability of lawyers to create work for themselves. When it is at the expense of policyholders' hard-earned investments, as with the ongoing saga at Equitable Life, it appears less edifying.
The latest ploy from the EL board is to sue the former directors and auditors for the part they have played in the downfall of the Society. It is now water under the bridge but as these matters drag on, policyholders' funds continue to suffer.
Instead of suing the former directors, perhaps their position could be revisited.
The first hint of trouble came when the Guaranteed Annuity Rate (GAR) started to exceed current annuity rates in 1993/94. At the time, it was the DTI that reviewed the reserves and provisions. It appears it misunderstood the liabilities of the Guaranteed Annuity Rate in 1998 when it requested a reserve 10 times that suggested by the directors and the auditors.
But the small print in the contract tells us that the Society had capped its liabilities in this regard to 3.5% compound return per year for the Accumulation Value (AV). It was to this AV and to this AV only that the guaranteed annuity rate was to be applied when measuring the income benefit, with further related bonuses on a discretionary basis.
The auditors' approved reserve of £150 million was therefore ample.
In this context, now that lawyers have taken over the Society, let them focus on the best interests of their members, the policyholders, so gratuitous legal proceedings are avoided. Surely, the current board's energies and members' funds would be better focused on hiring adept asset management in a difficult stock market environment.
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