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The "scandal" of Equitable Life has reduced people's confidence in saving for retirement, MPs have been told.
Opening a Westminster Hall debate on the failed life assurer, Fabian Hamilton (Lab, Leeds North East) said the UK faced the growing problem of an aging population that needed encouragement to save for retirement.
"Lack of trust in the system will lead to increased poverty in old age and remove any incentive to make personal provision," Hamilton warned.
"In the end the state will have to foot the bill, thus increasing the cost to all of us through higher taxation."
Equitable Life was forced to close to new business in December 2000 after it lost a court case over whether it could force policyholders to accept bonus cuts.
Hamilton said the problem would not have arisen if there had been adequate regulation in place.
In 2008 the parliamentary ombudsman published a report recommending that the government compensate savers who lost out when the company collapsed.
This was followed by a Commons public administration committee report which called on the government to accept the ombudsman's findings.
Hamilton also criticised former Treasury minister Yvette Cooper for giving a statement to the Commons on January 15 that was "totally at odds" with a command paper the government released.
He said Cooper's statement had implied a "comprehensive acceptance" of the ombudsman's report, while the paper rejected "three out of the four" most expensive recommendations.
The government has since appointed retired judge Sir John Chadwick as an independent advisor to look at the possibility of compensation for savers.
Sir John provoked anger when he refused to meet with an all-party group set up to campaign on behalf of those who lost savings with Equitable Life.
Hamilton called for Parliament to set a total amount of money to be given in compensation.
It was "about time the hundreds of thousands of investors received real justice", he concluded.
Dods Parliamentary Communications Ltd
georgegray
24th Jun 2009 at 6:25 pm