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On top of the seesaw
All these hidden hedge funds support pensions which are linked to final salaries. Ten years ago this was everyone’s idea of what a pension scheme should be, and its greatest charm was that it seemed to be painless. Most schemes were in surplus, most companies had given themselves holidays from paying contributions to them, Robert Maxwell had thought of them as sitting targets, and a prospective Labour chancellor was working on the same idea. The truth was, as we can now see, that their balance of risk and reward was unstable. They were then at the top of the seesaw. Now their sponsors just want to get off. They are happy, or at least willing, to make contributions towards their staff’s pension plans, but that is as far as they go. It would be logical, now, for BA to approach Standard Life and ask for a non-compete agreement: pension providers would not fly aeroplanes, and vice versa. The newest director could then take it easy.
Owners’ rights
This change must horrify all those who think that pensions are too difficult for pensioners to cope with. (Adair Turner, reviewing pensions for the government, is one of them.) If pensions are not linked to salaries, they can only be linked to the amount of money in each pensioner’s pot. The risks and rewards of investment go with them. Ownership goes with them, too. No one else can dip into the pot and use the money to cross-subsidise the chairman’s pension, which is standard practice in a conventional scheme. We can normally cope with the risks and the rewards that go with ownership, and do not depend on our employers to provide our houses for us. Ownership and savings are two sides of the same coin, and what this coin buys is independence and freedom of action. That must be a better guarantee for our old age than the goodwill of some long-past employer — and far better, of course, than counting on the government’s goodwill. From a Scottish accountant, this might even pass as good news.
Junk mail
The Royal Mail — but you guessed it. This is now an overstretched pension provider with a postal business on the side. The posties’ scheme will soon be in deficit by £4.5 billion, which will make the parent company insolvent and preclude it from paying any dividends to its shareholders (us). The chairman hopes that the scheme will be bailed out by the government (us). The post arrives later than ever, but nowadays it is meant to. Adjusting the targets lets the chief executive be paid a bonus of £2 million for hitting them, or some of them. ‘The best quality of service for a decade’, so the Royal Mail tells us. No wonder that it seeks growth from junk mail.
Take Walter’s tip
George Osborne, the new shadow chancellor, has the honour to represent my birthplace in Parliament, and to follow in the outsize footsteps of Lieutenant-Colonel Sir Walter Bromley-Davenport, the member for Knutsford (now relabelled Tatton) for 25 years. He was a true blue uncomplicated Tory, and Jock Bruce-Gardyne, succeeding him, was alarmed to hear him booming down the telephone: ‘Bruce-Gardyne? Just a word of advice. You want to look out for the PSBR. Have you got that?’ Jock certainly had — the Public Sector Borrowing Requirement was a new totem of policy, dear to his monetarist heart, but he was surprised that the word had got through to the shires. ‘Now’, the booming voice continued, ‘I don’t understand it myself, but there’s a clever fellow here who knows all about it. I’ll just go and get him…. Bruce-Gardyne? Are you still there? I’m so sorry, he’s asleep.’ So Jock got no explanation, but as so often, Sir Walter’s instincts were sound. My advice to Mr Osborne, when taking on Gordon Brown and his figures, is to look out for the PSBR.
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