A report to be published next week might clear the way for victims of the collapse of insurance giant Equitable Life to claim billions of pounds worth of compensation from the Government, it has been cliamed.
Parliamentary Ombudsman Ann Abraham will say that watchdog bodies were guilty of maladministration, according to The Daily Telegraph.
The finger of blame will be pointed at the Treasury, Financial Services Authority and Government Actuary’s Department.
The Ombudsman’s office yesterday confirmed that the report will be published next week, but declined to discuss its contents or to confirm or deny the Telegraph’s account of its conclusions.
The newspaper said that it had seen a draft copy of Ms Abraham’s report, which concludes that the Government’s failure to regulate the mutual insurer correctly has led to injustice for policyholders.
More than one million customers lost up to 50 per cent of their savings and pensions when the world’s oldest insurance company collapsed in 2000.
If government departments or agencies are found to be at fault in Ms Abraham’s report, some of those who lost out are likely to pursue court cases to recover of their money. Estimates of the potential cost to the public purse range as high as £4 billion.
Pensions campaigner Ros Altmann said: “If the Government is found to have failed in some way and be held responsible for the losses that people have suffered, then it should comply with what the Parliamentary Ombudsman says as quickly as possible, rather than make people wait for more years.
“If the Government can find billions of pounds to bail out savers in Northern Rock - who should have and could have been well aware of what the compensation terms were if that company failed - then how can it deny treating fairly people who have suffered losses from failure of the Government itself?”
The Treasury declined to comment on the report.
The Penrose Report of 2004, commissioned by the Treasury, found that regulatory failures were “secondary matters” in the demise of Equitable Life. Lord Penrose found the company was the “author of its own misfortunes” as it had made over-generous payouts to policyholders.
Ms Abraham’s report has been delayed since October 2006 after the Treasury delayed delivering copies of correspondence relating to Equitable Life and the Government’s Actuaries Department submitted more than 500 pages of comment.
One financial commentator said earlier this week that Equitable Life was “not just a cold case”.
Writing in The Observer, Ruth Sunderland said: “It is part of a pattern of inadequate regulation, and of failure by the Government to grasp the need for trust in the pensions system.
“There is also an important issue of accountability.”
In one of the biggest financial scandals ever in Britain, Equitable Life was forced to close its doors to new business after it claimed the value of the guaranteed annuities sold to policyholders exceeded its assets by some £3 billion.
It subsequently sold most of its fixed pensions business to Canada Life in February 2007 and Prudential took over £1.7 billion-worth of with-profits annuities in December last year.
Pressure group Emag (the Equitable Members Action Group) claims that the case for compensation is “overwhelming”.
It said on its website yesterday: “Though her [Ms Abraham’s] recommendation of compensation will be welcomed by more than a million past and present policyholders, there seems little chance of Gordon Brown paying up.
“Two years ago, Abraham’s call for compensation for the 125,000 victims of failed pension schemes was insensitively ignored by Labour, though in its defence it has since come up with a compensation package to appease most victims.
“Equitable Life campaigners - still laudably vocal eight years on - are expecting an almighty battle. Paul Braithwaite, general secretary of Equitable Members Action Group, says: ‘We expect Brown to fight tooth and nail to avoid paying out a penny in compensation.’”