Equitable Life has been ordered to pay compensation to a female investor in a test case that could leave the beleagured mutual facing similar claims from more than 1,000 disgruntedled 1,000 customers.
The Chief Financial Ombudsman upheld the claim for compensation by the unnamed woman, referred to as Ms E.
"Now this lead case has been decided, and the key general principles established, we can start dealing with all the linked followon cases where we believe the circumstances are similar," a statement from the ombudsman's office said.
The case relates to issues raised by more than 1,000 so-called late-joiners, investors who joined Equitable after 1998 by which time the former board had become aware of the scale of its financial liabilities with regard to its guaranteed annuity rate policyholders (GARs).
Ms E complained that had she been advised of the risk to her investment by the GAR issue she would have invested her money elsewhere. Ruling in her favour, Chief Financial Ombudsman Walter Merricks said: "When Ms E took out the personal pension plan, Equitable Life had been warned by its legal advisers that the courts might decide that the way it was running its with-profits fund to negate the value of the GAR rights, was not permissible.
"If this happened it would make the GAR rights costly for Equitable Life. Equitable Life therefore had knowledge that the GAR issue could affect the return on the policy that it recommended to Ms E, but it did not tell Ms E about this. "I find that it should have done.
"The advice Equitable Life gave Ms E did not meet the standards that Ms E was entitled to expect from Equitable Life's financial adviser," said Mr Merricks' ruling.
He continued: "Ms E's complaint has been selected as a 'lead case' to establish key principles applicable to the resolution of similar cases."
