STANDARD LIFE'S DECISION to demutualise came under political pressure last night after Dr Vincent Cable, the deputy head of the Liberal Democrats, backed a campaign for the company to remain mutual, reports The Scotsman .
According to the paper, the Edinburgh insurance giant said last week that its 2.4 million policy-holders would receive an average pay-out of £1,700 if they vote for the conversion. Standard Life plans to float on the stock-market in July, a move expected to value the company at up to £5.5bn.
But Dr Cable, a former economics lecturer at Glasgow University, warned the move may not be in the best long term interests of members, who have already seen the value of their policies fall.
He said the board of Standard Life had been extolling the benefits of remaining mutual until relatively recently, as the group successfully fought off a demutualisation campaign six years ago - when pay-outs to policyholders would have been far greater.
Dr Cable - who is supporting the Save Our Building Societies campaign - also criticised the "substantial potential benefits" to leading directors of the company after the flotation. His comments came as it emerged John Hylands - the former finance director - is on track to receive more than £1m in compensation if, as expected, he leaves the company later in the year.
MINISTERS ARE PLANNING a two-speed approach to reforming the UK’s pensions system, under which they would introduce swiftly some of Lord Turner’s proposals, but defer laws for a contentious national pension savings scheme, reports The Financial Times.
According to the paper, the move being advocated within the cabinet, would enable a lengthy consultation with British industry, and small businesses in particular, over the details of a scheme that is controversial because it may require companies to make compulsory contributions. It could also mean Tony Blair continues as prime minister until 2008 to oversee implementation of the reforms.
A senior government figure told the Financial Times that Labour would take two years over the plans to make them workable, drawing out the legislative process with separate bills in consecutive parliamentary sessions. The second of those bills would introduce the savings scheme.
Ministers fear that, unless they allow time for talks with employers, the pensions legislation risks becoming mired in parliament, hampering progress on a busy domestic agenda the Prime Minister wants to implement before he leaves office.
Experts have warned big businesses might accelerate the closure of occupational schemes, while small companies making no provision for employees could oppose plans.
The recognition of employers’ concerns comes amid disagreement in Whitehall over the financing of Lord Turner’s recommendations for a more generous basic state pension funded by a higher retirement age and the national pension savings scheme.
The government hopes to publish its pensions white paper next month. But differences between Gordon Brown, chancellor, and John Hutton, work and pensions secretary, over how to make the reforms affordable are unresolved.
A bill for reforming the basic state pension should be included in the Queen’s speech in November. But legislation for the national pension savings scheme is expected to be deferred until the following session of parliament and contained in a second bill.
PATERNOSTER ASSURANCE, the company launched this month to buy final-salary pension schemes, will bring forward its planned float by as much as two years after being inundated by willing pension-scheme sellers, The Times has learnt.
The first life insurer to be launched for 30 years raised an initial £500m to fund a war chest to buy pension schemes and had hoped to conduct a second fundraising after two years and an initial public offering within four.
However, the successful marketing of the new business has persuaded Mark Wood, the former chief executive of Prudential’s UK business who developed the new company, to raise more money via a float within two years. At least 100 companies have expressed an interest in paying Paternoster to relieve them of their funds.
Oliver Hemsley, the chief executive of Numis Securities, the mid-cap stockbroker that backed Paternoster, said that approaches were coming from companies directly, as well as via private equity houses and advisers such as actuaries, lawyers and accountants.
Paternoster will take on the assets and liabilities of companies’ final-salary schemes and will negotiate on whether the company and employees continue to make contributions to the scheme.
Backed by Eton Park International, the hedge fund manager, and Deutsche Bank, the investment bank, Paternoster initially will target small and medium-sized companies with relatively well-funded pension schemes. Paternoster is expected to announce a deal as soon as it receives approval from the Financial Services Authority, which is due this summer.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
Pensions neglect to be criminal offence
All-day event on 24 April
Consequences could be more severe than in stress tests
AFH has six segregated mandate funds