THE LEGAL TUSSLE between Equitable Life and Ernst & Young is mentioned in all this morning's papers with the case due to resume today, barring any last-minute settlement.
The Guardian says lawyers for the two sides have been talking to each other in recent days and it is possible there could be a settlement before the end of the week. But, says the paper, it seems more likely that Equitable and Ernst & Young will return to the high court this morning to continue trading allegations and accusations.
This is the second "act" of the marathon £700m case, following its eight-week break to allow the many parties involved to take a summer holiday, and it will be dominated by a procession of expert witnesses.
It is believed that all sides were talking over the summer, and that there were discussions about a possible settlement. The scandal-hit insurer is suing Ernst & Young - formerly Equitable's auditor - and 15 former directors of the company for their alleged role in bringing the 243-year-old firm to its knees.
A million people saw the value of retirement savings and investments slashed after Equitable came close to collapse. Equitable had originally been pursuing a negligence claim for £2bn against E&Y and for a further £1.7bn against the ex-directors.
But a few days before the case was adjourned in July the insurer announced it would not be continuing its £1.3bn so-called "lost sale" claim against E&Y, reducing the headline figure to about £700m - though Ernst & Young alleges that the claim now stands at just over £600m.
Equitable Life has claimed that its policyholders "suffered huge losses" as a result of its former auditor's failing to do its job properly, and will be calling a number of expert witnesses to back up its arguments. The insurer will not only have to prove there was audit failure. It will also have to prove that this resulted in a loss being suffered.
First in the witness box will be one of Equitable's expert witnesses, PricewaterhouseCoopers partner David Law. After all the witnesses have been cross-examined there will then be nearly a dozen closing statements from the lawyers representing the various parties. Assuming there is no settlement, the case - which began in April - is likely to run until at least December.
THE GOVERNMENT may have to abandon its attempt to get mortgage banks to subsidise first-time buyers and help more of them on to the housing ladder, says the Council of Mortgage Lenders (CML), reports The Daily Telegraph.
Five months of talks over the existing "shared equity" scheme ended last week and proposals have been submitted to the Treasury and the Office of the Deputy Prime Minister (ODPM), says the paper.
Under the "shared equity" proposals, both the lender and the government would put up around 12.5% of a home's purchase price, thereby cutting the cost for first-time buyers by 25% and reducing their mortgage payments. Owners could later buy out those stakes at the prevailing market price.
But, claims the Telegraph, negotiations have proved difficult. The CML first insisted the scheme would have to be profitable. Later, Abbey, the country's second-largest mortgage lender, and another huge provider, Alliance & Leicester pulled out of the discussions, it says
Last week, the government published a 49-page response to its broad "Homebuy" shared-equity consultation to lift 100,000 key workers into home ownership. Just one short paragraph was devoted to the mortgage lenders, stating that discussions "continue", even though the scheme accounts for one fifth of the Government's target.
The mortgage lenders' proposals will require the Government to bear the first 12½pc of any fall in house prices. The mortgage will also be charged at a premium to standard loans to reflect the added risk and the opportunity cost to the lenders of exposing their capital to the risk of co-ownership.
PROPOSALS TO raise the state pension age to 67 will have to be considered by the government as part of the answer to a looming pensions crisis, David Blunkett said yesterday, reports Financial Times.
The Secretary of State for Work and Pensions was speaking after a visit to the US, where the government has begun to phase in an increase in the state pension age from 65 to 67. Mr Blunkett is qouted by the paper as saying: "that was the kind of debate" Britain would have following the final recommendations of the independent Pensions Commission.
Lord Turner, chairman of the commission, concluded in his interim report that if future pensioners were not to face a much lower standard of living, there would have to be a higher average retirement age, increased private saving or higher taxes, or a combination.
IN A separate report, the FT says the UK could offer the world's first 50-year inflation-linked bond to investors as early as Monday.
The Debt Management Office, which borrows for the government, has hired investment banks to help with the sale, which is expected to raise about £1bn.
The launch comes amid low interest rates and could help lower the government's cost of borrowing. Governments have a strong incentive to lock in low interest rates and a host of governments have been borrowing for even longer periods, claims the paper.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
An added tier of asset management can of course deliver additional benefits for certain investors, writes Graham Bentley - just be sure you can justify it to the regulator and, especially, the client
The government is "in daily contact" with industry figures over the pensions dashboard as it prepares for the roll-out and its feasibility report, Guy Opperman has said.
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From 1 April 2019
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