Its good and bad news as far as pensions go in this morning's papers with the Transport and General Workers' Union firstly reacting angrily to reports the "Phoenix Four" directors of MG Rover have pledged just £5,000 each towards a trust fund set up for the 6,000 workers who lost their jobs when the carmaker went into administration.
The Guardian says initially, the four men, who bought MG Rover from BMW for £10, said they would contribute assets of up to £50m to the fund - though the value was subsequently scaled back to between £10m and £30m.
The directors said later that, on legal advice, assets could not be handed over to the trust until Department of Trade and Industry inspectors had reported on the collapse of the carmaker. Why that should be the case was never explained.
Yesterday, Britain's largest car dealership, Pendragon, revealed it had taken a £2.9m exceptional charge related to the MG Rover collapse. Pendragon has closed three of its 16 MG Rover dealerships and will convert three others to different franchises. Despite the charge, Pendragon's profits rose by almost a fifth to £36.8m in the six months to the end of June.
MEANWHILE PENSION fund deficits in the FTSE 100 index last month fell by the sharpest level in almost two years, slashing £12 billion from the collective total to £55bn, says the Scotsman.
The 22% drop was the biggest recorded in a month since October 2003, delivering a much-needed boost to the UK's pension crisis. But the improvement was put down more to market oddities than a long- term trend, maintaining the pressure on Britain's largest companies.
Consultants at Watson Wayatt are reported as saying the sharp rise in equities in July helped to narrow the gap, but only with the help of a simultaneous rise in bond yields. The two measures have spent most of the year canceling each other out, but began rising in unison due to a hike in long-term interest rates - boosting future bond returns.
Pension funds are invested across a range of assets, including shares, bonds and property. The combined deficit of the FTSE 100 includes a gap of £2.85bn at Royal Bank of Scotland and £4.4bn at BAE Systems.RBS also features in the Times after chief executive Sir Fred Goodwin reportedly admitted he must improve his relations with investors because concerns over his management style have contributed to the low rating of the bank’s share price.
The shares fell by 4.4% as RBS unveiled its interim results yesterday.
Goodwin was, says the paper, responding to a question from James Eden, an analyst with Dresdner Kleinwort Wasserstein, who said there was a “management discount” built into the price of RBS shares, which trade on a much lower income multiple than rivals such as Lloyds TSB. Asked by Sir George Mathewson, RBS’s chairman, to clarify his comments, Eden said: “I think there’s a perception among some investors that Fred Goodwin is a megalomaniac who concentrates on size, not value.”
Goodwin is reported by the Times has replying that he was certain some shareholders held the view that he was a megalomaniac, but is added: “It’s always been important to me to maintain an open dialogue. We’re moving on now into a different style and a different form of dialogue.”
Investors have been pressing RBS to stop making acquisitions and to give surplus capital back to shareholders through a share buyback. Goodwin has assured investors that further big acquisitions are on the back burner, but he would not comment on RBS’s possible purchase of a £2 billion stake in Bank of China.
Echoing other high street banks reporting this week, RBS says consumer lending had slowed in the six months to June 30, causing a 2% fall in profits at its retail division compared with a year earlier.
BARCLAYS MEANWHILE reported a 9% increase in first-half profits as growth in its business banking and investment banking operations offset rising bad debt charges at its Barclaycard credit card unit, says the Financial Times.
In the six months to the end of June, pre-tax profits were £2.69bn, up from £2.46bn in the same period of 2004, when adjusted for the introduction of international financial reporting.
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 Matthew West on 020 7484 9893 or email [email protected].IFAonline
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till