We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
|
Inequitable Life? Equitable Life is a mess, that is for sure. The responsibility of making sure the people who look after your money can be trusted ultimately lies with the owner of the money… the pensioners, the beneficiaries of what Equitable Life actually does. However if fraud or other gross misrepresentation is involved, and not just incompetence, ineptitude or misfortune, then things do change somewhat as it becomes a criminal matter.
However Equitable Life is massively regulated, so many of its weird business decisions must be seen within the context of the weird distorted environment within which it operates…
So yes, there is an argument that as the state should therefore also be liable for the mess. But then if you accept that, given that the British economy grows more regulated by the day, that would suggest investors should be lining up to claim tax money from the state every time anything goes bust. After all, what makes Equitable Life’s casualties any different from the casualties of any other business cock up?
|
Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
|
“…that would suggest investors should be lining up to claim tax money from the state every time anything goes bust.”
They do, Perry, they do.
And the people who have NOT made a hash of their business decisions end up paying for those who have.
It’s called fairness according to the state. Feh.
I have a small pension top-up with Equitable Life – but it is a unit-linked policy, not a with-profits.
Everything I look up refers to the with-profits business with little mention of the safety of the unit linked side of things – although at the end of the day the money must come out of the same pot.
Does anyone understand the business enough to guide me here?
As someone who works closely to the investment industry in Britain and elsewhere, I would say that Equitable’s demise is more a case of mass incompetence and greed rather than criminality. And I do not see why we taxpayers should have to shoulder the bill. The moral hazard implications are enormous. Surely the savings and loan debacle in the US back in the 1980s, which was connected to government extension of liability insurance cover, was warning enough.
Caveat emptor, is, however, a bit of a tough sell to those who bought Equitable policies back when that firm had an image and reputation as strong as say, Barings. I guess in the end the best protection is to diversify one’s investments far and wide. That has been my approach.
The answer to your question, Perry, is nothing. Nothing makes Equitable Life any different from the casualties of any other business cock up. It is by all accounts a sad story of hubris, arrogance and incompetence but it is not my problem. It is not my problem as a taxpayer, nor as an investor in other pension products or as the (fractional!) owner of any other pot of money people may try to rob to “right” the Equitable Life situation. That won’t stop those at the loosing end of this story from trying to make me, or the government in my place, pay.
As much as I hate to admit it they have a point. The State holds out the position that by regulating and monitoring various aspects of our lives it can improve them or prevent various abuses that hurt us all. Modern life is littered with examples from anti-tobacco legislation to the massively regulated financial services markets. So, the State has the right to tax us and to impose various forms of behaviour through regulation. With that right must surely come some responsibility. In this case I refer to the responsibility to do what the State says it does, e.g. monitor that Equitable Life has the reserves to back up its promises, and to suffer the consequences if the State does not, e.g. by allowing a bunch of fuddy duddies to not monitor their buddies over at Equitable.
If not, what exactly are we getting for our money when we fund the various regulatory agencies?
I don’t think the state does have the right to tax us and impose various forms of behaviour through regulation, it just has the ability, which is to say, control of the means of organised violence.
The state has responsibilities from the fact it takes my money and imposes politically derived behaviours on me in the same manner the mafia has responsibilities when it takes money in return for ‘protection’. I do not accept either as legitimate or moral and even on a utilitarian basis, as regulation clearly does not have the desired effect, the solution is not more regulation. As it is often said, rule one when you find yourself in a hole is… stop digging.
We could clearly have a long discussion on the definition of
but the State clearly thinks it has the right, however much we may disagree. My point, however, related solely to the rather obvious fact that the State must be responsible for its actions or inactions, after all even the mafia expects to have to provide protection in return for you money. This responsibility must streatch further than just personal responsibility by some senior civil servants in cases like the Equitable. If regulation or lack thereof contributed to investor losses by creating a false sence fo security, after all it was know for years that the Equitable had not adequately provisioned for its payout promishes, then some sort of recource to the regulator should be possible.
I lost out on Equitable – but not disastrously; that’s my declaration of interest out of the way.
Seems to me that this sort of thing is the downside of not having the government interfere in every cranny of our lives. Like, if I bet on a horse, I don’t expect state compensation if it falls over and decides it would rather be cats’ meat half way around the course.
On the other hand, the state has an interest in ensuring that we don’t all become a charge on it [ie. on our fellow tax-payers] in our dotage, so it would prefer us to pay for private pensions through companies such as Equitable than throw ourselves on its mercy come age 65, and to that end, it sets out to regulate these companies to ensure that they more or less do their job properly.
Having set out in that direction it is under an obligation on our behalf, having billed us through or taxes for doing the work, to do it properly; that obligation it self-evidently has not fulfilled here.
Hence to some degree, as a matter of simple justice but also so as to ensure that folks continue to invest in private pensions and generally to use the private financial systems, rather than rely entirely on the state [as horrible a socialist notion as ever there was, as Phony Tony and his Cronies, even Gordon, would readily agree] the state IS responsible for the victims of Equitable Life’s failure. After all, as the Equitable’s users’ pressure group points out, the developing crisis is all too obvious from the information submitted to the financial regulalator over the past 15 years or so. Basically, Treasury civil servants didn’t do their jobs properly. In their own way, they were every bit as negligent as the Equitable’s board.
Where does that leave us? Probably a long and messy case in the European Court at the end of which some compensation will be paid, but too late for many of the pensioners who, in the nature of things, will long since be vapour up a crematoriam chimney.
It’s not an entirely comfortable conclusion, but given a stark choice, I’d rather be poor in my old age than let Tony or Gordon, or Michael or Oliver come to that, or Whassisname or whassisname [Lib/Dem] have anything whatsoever to do with my financial affairs, or any other aspect of my life.
Equitable Life is the price of freedom from something a lot worse.
This shows the pernicious nature of regulation. Not only does it create moral hazard, reducing people’s self-reliance, self-insurance, and scrutiny of where they put their retirement savings, but it also then creates pressure to interfere still more in people’s lives when the regulation inevitably fails to have the desired effect. They screw up once by regulating, which costs us all money; then when their regulation fails, they tax us to bail out the victims. If if they do not bail out, then the victims feel betrayed because they “trusted” the government to regulate responsibly.
It is better to live in an anarchy and have your own guns & security, rather than the police say they will protect you, and then fail dismally. At least in the former case you can plan for disaster – in the latter you are effectively duped into a false sense of security.
Equitable demonstrates that regulation is evil – it is fraud (the false promise that “we will look after you”), it is an infringement on liberty (imposition of bureaucracy on companies and customers), it is incompetence and negligence, and it is theft (bailouts).