BANKS, LIFE assurers and fund managers are to be given leading roles in setting up and eventually running the government's proposed low-cost national pensions savings scheme.
In an interview with The Financial Times, James Purnell, pensions minister, said top executives from the financial services industry would be recruited to a proposed “delivery authority”.
Its job will be to establish the system of so-called personal accounts, into which up to 10 million employees will be automatically enrolled, with their employers compelled to contribute.
Attempting to dispel fears personal accounts could lead to the nationalisation of the savings industry, Purnell said the “vast majority of functions” in running the scheme, starting in 2012, would be carried out by the private sector, whichever model the government decided on.
His promise will offer some reassurance to financial services companies which feared they could be sidelined. The private sector will be called on to operate aspects of the scheme under contract, including collection, and administration.
Ministers have said the model proposed by Lord Turner’s Pensions Commission – for a new national body to organise collection and buy management services for six to 10 funds – is the frontrunner because of its projected low running costs.
But the government is still examining alternatives, including the Association of British Insurers’ bid for the industry to operate the scheme directly, offering more expensively-branded products, and will unveil its chosen design in the autumn.
Purnell said whatever the model, there would have to be a central organisation to oversee collection arrangements, set service standards, deal with complaints and set contracts with private sector operators for administration and fund management.
These tasks would be taken on, in the first instance, by a delivery body run by industry experts as early as spring 2007.
His comments will reinforce expectations the government will opt for a hybrid model based on Lord Turner’s scheme but possibly using the insurance industry’s infrastructure.
F&C ASSET Management received yet another blow to its Edinburgh operation yesterday as it lost the mandate for the ISIS Smaller Companies Trust - the investment group chaired by former Scotland rugby star Andy Irvine, reports The Scotsman.
F&C - the modern-day incarnation of both ISIS Asset Management and Ivory & Sime - lost out after a lengthy tendering process which followed the departure of its star fund manager, Stephen Grant, in April.
Irvine said he had received approaches "well into double figures" from rivals keen to take over, and after consultation with shareholders it was decided a change of management would "reinvigorate" the group.
The mandate was eventually awarded to Montanaro Investment Managers, meaning the £65.8m trust will now be managed from London instead of Edinburgh, and will lose the ISIS name.
It will now be called Montanaro European Smaller Companies Trust - reflecting a broadening of investment policy from exclusively UK-listed small-caps into Europe.
Irvine insisted the performance of the trust had been good under F&C, but that Grant's departure had forced the firm to take stock. It emerged some investors wanted an exit - but at a higher value than where the shares then stood - while others were unhappy with the choice of UK small-cap as a sector.
The trust - alongside Intelli Corporate Finance - drew up a short-list of five firms before picking Montanaro. It is believed "lots of consideration" was given to F&C's proposal, but it fell short. A source said: "If Stephen Grant had stayed, they would probably not have changed the mandate."
ISIS Small Companies Trust is F&C's third lost mandate in 12 months, following a failure to hold on to the Latin American Investment Trust and the Emerging Markets Trust, although neither of the two is based in Edinburgh.
SIR VICTOR BLANK, the new chairman of Lloyds TSB, moved to squash speculation yesterday that he had been drafted in to lead a break-up of Britain’s fifth-biggest bank, reports The Times.
He also dismissed suggestions he might change the group’s dividend policy — its shares offer the highest dividend yield in the FTSE 100 — or hive off the bank’s Scottish Widows insurance unit.
The City stalwart and former chairman of Trinity Mirror participated in several blockbuster deals when he was head of corporate finance at Charterhouse in the 1980s. His arrival at Lloyds immediately triggered speculation a corporate deal was on the agenda.
Asked about the rumours, Sir Victor said: “Observers would be wrong. I was an investment banker some time ago, but I do not think I have been brought in to be one. I have experience on many boards and I am here to create value for shareholders, in the real sense of the word.”
Sir Victor added he did not expect to spend his tenure batting off takeover approaches from overseas rivals, and that continuing speculation Scottish Widows might be sold off was “misplaced”. “Scottish Widows is an important part of this business,” he said.
His comments came as Lloyds narrowly beat City forecasts with an 8% rise in underlying half-year profits, but the results were weighed down by higher bad debts and slower revenue growth in the UK retail bank.
Eric Daniels, the chief executive, said he was “pleased” with the results, as pre-tax profits in the six months to June 30 were £1.75bn, up from £1.63bn in the same period last year.
Lloyds said its bad debt impairment charge had jumped to £800m — up 20% from £666m a year ago. Bad debts in the UK retail bank rose by 16% to £632m, but Lloyds forecast they would not continue to rise in the second half as tightened lending criteria began to feed through.
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