The EU will today savage the government's handling of the Equitable Life crisis, and its failure to protect Equitable Life policyholders.
Equitable Life had to close to new business in 2000, after it emerged it could not honour its policies; it went on to dramatically cut the value of customers' life savings, leaving many thousands of policyholders in deep financial trouble.
Today's report marks the culmination of an 18 month inquiry by the European parliament in Equitable Life, and will call for government compensation for the many thousands of investors who lost part or all of their savings and pensions when the company ran into trouble.
The report castigates the government's "light touch" approach to regulating the life insurance business, especially Equitable Life, which was seen by the authorities as "too reputable" to run into trouble.
The report notes that the UK's light touch:
"went a step too far and thereby contributed to a weak regulatory environment, which allowed the difficulties at Equitable Life to grow unchecked".
The report then states:
"There have been a significant number of statements to the effect that the UK regulators failed to prevent Equitable Life from steering into its crisis, and therefore failed to protect policyholders in the UK and other member states from suffering financial losses as a direct consequence.
It is also apparent that the UK regulators behaved with undue awe or deference towards Equitable Life, particularly given its long history and hitherto highly reputable status, leading them to consider it as the top pick of the life insurance industry and apparently believed to be too good and too reputable to make mistakes.
In view of the UK government's failure to comply with the requirements of the (EU's) third life directive, and given the absence either of accessible legal redress through the courts or of effective alternative means of redress, the committee firmly believes the UK government is under an obligation to assume responsibility.
The committee therefore strongly recommends the UK government devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders within the UK, Ireland, Germany and elsewhere."
Unfortunately, for the long suffering policyholders, the committee cannot order compensation. However, the report's author, Liberal Democrat MEP Diana Wallis, said:
"For the victims of the Equitable Life failure, the report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK parliamentary ombudsman, should arm the victims with powerful findings," she said.
It is absolutely critical to the future of the pension industry and to all of us as savers and people who hope eventually to see our retirement, that there is confidence in this sector. I hope our report will assist that process."
Tory MEP Robert Atkins, an inquiry committee member, is quoted in The Guardian as saying:
"I believe that due to its failure to adequately protect policy holders in accordance with EU legislation, the UK government is obliged to devise an appropriate scheme to ensure full compensation for victims of the debacle.
Having categorically proven that the UK and EU financial redress systems are unsatisfactory and lack the requisite level of security one would expect from the single market, the EU institutions and British government must urgently combine forces to ensure that higher standards of investor protection and security are legally enforced.
This is imperative if people are to be expected to save judiciously for their retirements."
There will also be a report from the UK parliamentary ombudsman, Ann Abraham, on the Equitable collapse. However, as befitting the "speed" of government processes (doubtless to ensure that Equitable has long been forgotten), this report will not be issued until October at the earliest.
Too little too late for the 1 million policyholders affected by the Equitable scandal.
Maybe they should consider launching a class action?
Is it any wonder that people do not bother to save for their retirement?
How can anyone possibly trust the pensions industry, or the government, to look after their money or their future?