EQUITABLE LIFE unsurprisingly dominates the headlines and all the front pages this morning, after yesterday's long-awaited publication of the Penrose report.
The FT leads with the basic facts – the Penrose is scathing as Equitable Life's one million policyholders were failed by a combination of "manipulation and concealment" by its senior management and "complacent" government regulation.
Lord Penrose said its problems stemmed principally from over-dominant senior executives – or one in particular - and a weak board.
However, he was also critical of regulatory failures, condemning the Treasury, Department of Trade and Industry and the Government Actuary's Department for failing to spot the problems and for being able to do anything about it.
FEEDBACK PRESENTED in the Scotsman from Vince Cable, Liberal Democrat MP, called the affair a "total whitewash" because Penrose found failures in the regulation of Equitable Life but policyholders will still have to face yet more worry and distress about their financial positions.
Labour MP George Mudie recognised the only course of action now for policyholders is years of litigation against directors and auditors to gain redress.
Aside from the publication of the report, Ruth Kelly MP also announced two new independent reviews: one by Paul Myners into the corporate governance of mutual life offices and the other by Sir Derek Morris into the actuarial profession.
THE TIMES points out the concerns about regulatory cover actually stem from the ‘light-touch’ regulation introduced when Margaret Thatcher was Prime Minister in the 80s, as the regime was not updated to “meet the requirements of an increasingly sophisticated and risky investment industry”.
THE DAILY TELEGRAPH more worryingly points out it could all happen again, as Lord Penrose is quoted as saying:
“It must be assumed that it was within the scope of acceptable actuarial practice in the profession's view. If so, it could happen again."
In particular, Penrose suggests the Financial Services Authority's proposals to reform with-profits life insurance funds "do not equip the regulator to take effective action in such circumstances" so he has proposed the FSA appoint monitors to sit in on the board meetings of life insurers and be given full access to board papers.
Other news in the Times suggests FTSE 100 employers are putting twice as much as the usual contribution into their own pension pots while cutting their employees’ retirement benefits, according to a report by the TUC.
At least two-thirds of FTSE 100 directors have final salary scheme membership, says the TUC, compared with only 37% of all workers.
Moreover, over half of these directors accrue funds at a rate of one-thirtieth of their final salary for every year they work – whereas the usual rate is at least one-sixtieth or one-eightieth.IFAonline
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