BRITAIN'S PENSION troubles have claimed another two corporate victims. Financial advisory group Berkeley Berry Birch and leather tanners Pittards were both declared insolvent yesterday as a result of crippling pension deficits, reports The Daily Telegraph .
According to the paper, the 166-year-old Pittards, is taking out a company voluntary arrangement (CVA) to keep the business trading and guarantee 240 jobs.
By filing for a CVA, the pension scheme with its £32.9m deficit can be handed over to the state-backed Pension Protection Fund - which will pay the 2,000 members "90% of what they were entitled to", a PPF spokesman confirmed. In return, Pittards will pay the PPF an upfront sum of £1.6m, a further £2m-£3m over the next five years and give it an 18% equity stake in the company.
A different approach to a similar problem was taken by the pension trustees at Berkeley Berry Birch, the insurance broker and top five independent financial adviser. In the first instance of its kind, the trustees successfully petitioned for the company to be placed in administration.
Graham Pitcher, chairman of the trustees, told the paper he had taken the decision because "it was only a matter of time before it went into administration and I didn't want the group spending money on other things - we didn't want other creditors being prioritised".
Berkeley Berry, which has a £13m pension deficit, has been close to going into administration for the past few months. Just two weeks ago, two businesses were sold off to raise £2.35m for working capital.
If the pension scheme recovers just 10p in the pound, it will be able to buy an annuity in the market and not have to resort to the PPF. Mr Pitcher said: "We want to protect our members as much as possible and the PPF minimum security is woefully short of what our members are due."
Although none of the scheme members qualify for more than the £25,000 PPF maximum payout, the Berkeley Berry scheme offers a generous 5% annual inflation indexing that will be lost with the PPF.
THE FUTURE OF plans for a wide-ranging revamp of Britain’s pension system is in serious doubt after a fundamental disagreement on the way forward between Gordon Brown, the chancellor, on one side, and Tony Blair and John Hutton, the work and pensions secretary, on the other, reports The Financial Times.
At a three-way meeting last week, Hutton outlined his modified version of the proposals by Lord Turner’s Pensions Commission for a bigger basic state pension indexed to earnings, paid for by a higher state pension age and bigger taxes, and a new low-cost national pension saving scheme.
Brown countered with plans that Downing Street and the Department for Work and Pensions believe would in effect kill off the Turner proposals. The chancellor is understood to have wanted a guarantee of a limited 3% annual rise in the basic state pension until 2020, a bigger rise than the link to prices now delivers but falling well short of restoring the tie to earnings.
Brown also wanted to increase the means-tested pension credit in line with earnings over the same period. That would only slightly reduce the projected big increase in means testing of pensions. Critics outside the Treasury believe it would make it impossible to introduce a national pension savings plan as members could not be broadly assured that their savings would escape the means test in future.
A fierce exchange of correspondence is understood to have taken place between Brown and Lord Turner, with the commission chairman arguing Brown’s proposals did not answer the challenge the commission was set up to address.
Blair and Hutton believe they were given the clear impression the chancellor wanted to announce his package in Wednesday’s Budget and a “vigorous argument” took place among the three – a version of events that was flatly denied by the Treasury on Tuesday. “There never was any intention of making a Budget announcement,” it said.
Those supporting the chancellor’s pension proposals see them as “a middle way through”, leaving him flexibility over short-term affordability and long-term finances, with no commitment on pension spending beyond 2020.
HSBC AND THE investment bank Close Brothers will be warned next month by the Association of British Insurers about promoting their chief executives to chairmen, reports The Guardian.
Britain's biggest investor group will send out a so-called "amber top" signal to investors that they should question executives very closely before sanctioning a move by the chief executive to the top job.
City guidelines on corporate governance state companies should not promote chief executives to the chairmanship unless they have special reasons to do so. However, since these new guidelines came into effect in 2003, they have been breached on several occasions.
The ABI is concerned companies flout the guidelines regularly and it will now issue an amber warning each time a chief executive becomes chairman. Manifest, the corporate governance service, says 63 chief executives in the FTSE 350 are either also chairmen or have been appointed chairmen since January 2004.
Investors fear a former chief executive will not be independent enough to question strategies put in place under his or her stewardship. Companies must comply with the code on corporate governance or explain why they have broken it.
AVIVA YESTERDAY conceded it may be willing to increase its merger offer to rival insurer Prudential, a move that knocked its shares and therefore the value of its current all-paper proposal, reports The Scotsman.
The UK's biggest insurer - which owns Norwich Union and the RAC - was forced by the Takeover Panel to clarify suggestions that its £17bn approach was a final offer. Aviva tabled the proposal late last week, but has been emphatically rejected by the Pru's board.
Shares in the company flopped 2.1%, or 18.5p, to 830p on the concession, which said chief executive Richard Harvey had "not made a no increase statement" relating to the bid. This valued its proposal at about 680p, compared with Prudential's current share price of 741.5p.
Harvey yesterday began a series of meetings with leading Prudential shareholders to pick over the terms of the approach - despite the negative stance of his opposite number Mark Tucker and Pru chairman Sir David Clementi. Analysts have said a deal would make sense at over 800p, but added the waiting game would play out over a period of some time.
Harvey's move has sent the life insurance sector into a frenzy over the past few days, with few firms untouched by speculation of a counter-bid or subsequent takeovers in the event of Aviva and Pru actually getting together. European giants AXA, Allianz, Generali and AIG have all been linked with a counter-offer, although Mikir Shah, an analyst at Fox-Pitt Kelton, said a move across the Channel was unlikely "unless Aviva tabled a formal offer first".
Harvey and finance director Andrew Moss are believed to have planned about 13 meetings for today or yesterday. They have ruled out a hostile bid.
HSBC, BRITAIN’S biggest bank, is to become the only high street lender to offer equity- release mortgages to older homeowners in a market worth £5.3 billion, reports The Times.
The bank initially will target 200,000 existing customers aged over 70 with the new schemes, despite a continuing investigation by the Financial Services Authority into the way that existing providers have sold the plans.
Equity release plans, which have had a makeover since a 1980s mis-selling scandal, are proving to be popular with pensioners keen to unlock cash from their homes. HSBC’s new schemes, to be launched on Friday, will be provided by In Retirement Services, an equity- release specialist.
The new service was criticised by industry experts.Teresa Fritz, of Which?, the consumer group, said HSBC’s offering will overcrowd an already saturated market with yet another expensive, complicated product. But HSBC says it recognises the sensitivity over equity- release plans and is focusing heavily on the advice process.
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Has been cold-calling consumers
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Slow and steady growth
Missed funding target by £240,000
Denies any wrongdoing