Our aim is true as controversial endowment complaint firm shuts down

Published on Sunday 11 June 2006 00:15

GERMAN philosopher Arthur Schopenhauer was one of history's great pessimists. When surveying the financial scene, I often find myself agreeing that there aren't too many reasons to be cheerful. But that is about as far as I will go before parting company with him.

In his book The Art Of Always Being Right he argues that there is no such thing as truth, and what matters, right or wrong, is winning the argument. He lays out 38 cheap tricks to help you lie and cheat your way to victory.

In his defence, it was all designed as a bit of a bad joke, with its advice to "become personal, insulting and rude" when fighting the enemy, set up a diversion or "turn the tables" on your opponent. Sadly, not everyone saw the irony. Indeed, for some lost souls it became the bible for success.

Luckily, not for us. Of course there is such a thing as truth, though sometimes it is far from easy to spot. So while I couldn't possibly lay claim to "always being right", I am pleased to report that we have been doing rather well recently.

Our first bull's-eye relates to endowment complaints firm Vickers Anderson. About six weeks ago we revealed growing concerns about the company, which took 495 off customers while promising to sort out their endowment headaches. Many policyholders dispatched the fee but then heard nothing for months.

Last week the Department of Trade and Industry shut the company down in the "public interest" by applying to the court for a compulsory winding-up order.

Anyone owed money by the firm should contact the Official Receiver. E-mail: [e-mail] If you have an outstanding endowment claim, you should contact your insurer urgently.

The price is right

THE next tick in the "we got it right" box relates to Parliamentary Ombudsman Ann Abraham's report into the pensions scandal. For the sake of any readers who have been lost in the jungle for the past five years, I will recap. A big scandal broke when more than 75,000 employees lost pensions when their companies went bust.

The Ombudsman found the government guilty of maladministration and ordered it to pay compensation by restoring these workers' pensions.

Ministers refused, saying it would cost the taxpayer 15bn. Former work and pensions minister Margaret Hodge wailed it would put 6p on tax. Clearly, she has never read Schopenhauer. The whole point is to make your opponent look ridiculous, not paint yourself as a clown.

We said at the time that the true cost was somewhere between 3bn and 7bn, with 5bn the best guess. Our experts said it could be paid out of petty cash. At the risk of gloating, I am afraid we were right again.

Last week, the government presented its response to Parliament. Schopenhauer would have been proud of them. The 47-page document stuck rigidly to its 15bn figure, which it describes as the "cash terms" costings.

Now, if you ask 100 different actuaries what "in cash terms" means, you will get 100 different answers. I suggest rather it is the biggest number they could possibly come up with to frighten the life out of the rest of us.

Buried in a tiny table on page 45 of the document is a quite different figure, enlighteningly called "net present value".

You or I might call it the true cost of compensation. If the government wanted to solve the pensions scandal today, and make it go away with one stroke of the pen, this would be the size of the cheque it would need to write.

And it is nowhere near 15bn. The government's own figures put it at between 2.9bn and 3.7bn - considerably more manageable, and in line with our original estimates.

Yes, it is still a great deal of money, until you put it into context. Since it came to power, this government has taxed pension funds to the tune of 5bn a year every year. As little as seven months of this cash could end these people's misery.

Contrary to Ms Hodge's hysterical assertions, it isn't even a penny on tax. Over the past two years, the government has overpaid 4bn via the much-criticised tax credit system.

So it's back to Schopenhauer for ministers, I'm afraid, because they are still a long way from winning this argument.

Trust U-turn on cards

THERE are signs that the government is giving in over plans to tear up trust law and the inheritance tax treatment of family trusts.

At the end of last week, a series of amendments to the Finance Bill were laid which may mean many ordinary people will not be affected by changes announced in the Budget after all. However, it is still too soon to be sure of the final outcome. Watch this space.