Jason Nissé: Personally, I'd like to see Lord Penrose's Equitable Life report before I retire

Dear Lord Penrose,

I hope you don't mind my writing but, now that Ruth Kelly has appointed you to conduct an inquiry into the Equitable Life, there are quite a few policyholders, me included, who would like to drop a line suggesting some areas of enquiry.

The worry that many of us have is that this will be one of those inquiries that lasts many years and will only be published once it is of little more than academic interest (for reference, I suggest you look at the DTI reports into the Mirror Group flotation and the Guinness scandal). Though the Treasury says you are independent, I find it hard to believe that it would be happy with a report that says that regulation failed and the Government should cough up compensation. (However, as many MPs, probably even Ruth Kelly, have some money with Equitable, there is the potential for an interesting debate at Westminster). What they want to see is something that slams the old management, says that there was little the regulators could do given faulty laws brought in by those nasty Tories, and suggesting a few changes that the responsible minister can announce with a blaze of glory.

By reiterating there will be no lifeboat for the society, the Treasury is not saying that there won't be cash for policyholders. What it is saying is that Equitable has to cobble together a deal in which the holders of the guaranteed annuities (GAR) and the rest of the with-profits policyholders are able to compromise enough for the group to complete its sale to the Halifax. (Why Halifax would still want such a tarnished asset at the end of this is hard to fathom. But James Crosby is a canny operator and the cost of Equitable will more easily be lost in the new HBoS giant that it would have been in the old former building society).

However, I've strayed from the path of enlightenment. I was going to tell M'Lud where to focus your investigation. It is tempting to go all the way back to the 18th century, when Equitable was founded. In those days, you put money into a pension, you were told bugger all about how it was doing until the time came that you asked for your money back, when you were given an annuity which allowed you to live comfortably until your death.

Death, of course, came early – the retirement age of 65 was set by Bismarck when he was Chancellor of Germany, who discovered that life expectancy was 66 and gave people a year to settle their affairs before they passed away. These days we can expect a good decade and a half of retirement, so you need more money in the pot.

Sir Howard Davies at the Financial Services Authority thinks this is a fruitful route because life companies still operate the same way they did. He wants us to get rid of with-profits policies, review the annuities structures, challenge the old order. And he is probably right. But don't get involved in this. It is a distraction from the main issues, one of which is the failure of the regulators who – after much reorganisation and messing about – all work for Sir Howard.

Charles Thompson, who is trying to sort out the mess as chief executive of Equitable, thinks you should go back to the 1970s, when the GARs were sold. In which case, Equitable's management is not the only board of a life company that could be considered culpable.

But while others sold GARs and were able to soak up the cost by using their reserves – their orphan assets, if you will – Equitable distributed all that it could, and more, so it had no cushion to absorb the pain.

Ultimately, it is not worth going back to the 1970s as it solves little. What you should concentrate on, M'Lud, is the 1990s. This is when the GAR issue was becoming more and more apparent, and the Equitable board was becoming more and more like an ostrich. As interest rates fall through the decade, Equitable should have been salting cash away. Instead, it was distributing more than it was bringing in, essentially betting the farm on a change in fortunes or a miracle. As it said it would not put itself up for sale, the prospect of a white knight has to be remote.

Equitable had a chance to pull itself back from the brink three years ago. The perverse market movements at the start of the Asian crisis showed the board how close to the abyss the life assurer was. But they refused to get off their high horses and put the group up for sale. At this point, disaster could have been averted. But it wasn't.

There are lots of issues you might address, Lord Penrose. But if you want a place to start, may I suggest that one.

Yours etc

j.nisse@independent.co.uk