Equitable ruling unsound - PO
A report suggesting Equitable Life policyholders should share no more than £500 million in compensation was branded "unsafe" and "unsound" by the Parliamentary Ombudsman.
Ann Abraham has written to MPs warning them that if the proposals set out in the report by former Appeal Court judge Sir John Chadwick are acted upon, they will not deliver fair and transparent compensation for people who lost money due to the problems at the society.
She warned Sir John's report misinterpreted central parts of the conclusions she had reached in her own report, while it ignored others, despite the fact that she had explained to him how she had reached them.
She said: "I find these flaws particularly concerning, providing as they do the basis for some of the central and more controversial proposals within the Chadwick report."
Ms Abraham added: "I thought it important to let Members know as soon as possible that the Chadwick proposals seem to me to be an unsafe and unsound basis on which to proceed."
Equitable Life policyholders expressed anger last week after Sir John suggested they should share only between £400 million and £500 million in compensation.
This was despite acknowledging that they had made relative losses of between £4 billion and £4.8 billion by investing their money with Equitable, rather than another life insurer.
He also estimated that they had seen the value of their policies fall by up to £3.7 billion as a result of the problems at Equitable.
But Ms Abraham said she did not think the approach used in the Chadwick report was even relevant any more, as his terms of reference were set by the previous government, which had rejected many of her findings.
As a result, she said using it would not enable the new Government to meet its commitment to implement her findings in full.
The Government will not say exactly how much compensation is to be shared out between the 1.5 million Equitable policyholders until this autumn's spending review.