Where did the problems start for Equitable Life?
The insurer is the world’s oldest mutual, it has been around since 1762. In the 1950s it began selling guaranteed annuity returns policies, which guaranteed a minimum annuity rate when policyholders retired. Equitable ran into difficulties in the 1990s when interest rates and inflation started to make it more expensive to meet the guarantees. In 1994 it said it planned to cut bonuses, but in 2000 it was told by the courts it must honour them. The society cut the value of the investments of millions of with-profits policyholders as it became unable to afford its commitments. Some policyholders saw 50% wiped off the value of their savings. Equitable was put up for sale, but was unable to find a buyer. It closed its doors to new business in December 2000. Last summer the parliamentary ombudsman, Ann Abraham, published a damning report on the debacle, shining the spotlight on the shortcomings of regulatory bodies.
