Monday, 16 May 2016

Heads together single 1984

The deadbeat single from 1984 was released on heads together - glad to see the name is being used by some 21st century deadbeats!

Thursday, 5 May 2016

Pensions - some more chat on the real crisis

Post Maxwell the attention was solely on where the money was invested. I invited Alastair Darling into our offices in George St pre-election in 1997 and explained why we as a company wanted a way to give staff more shares in the company. While happy to back markets and privatisations, he was against widening staff share ownership. I joked about Marx and controlling the factors of production and then passed him on to our market dealers where he seemed fascinated by the screens.

I couldn't help thinking Maxwell was a long time ago and suggested our biggest issue in Pensions was the control management exerted over trustees and their capacity to create prospective early retirements on full pay. This was the creation of a liability that would just grow and grow.

This was highlighted again when the Government sold the Royal Mail without the pension. The pension had assumed a massive liability during restructuring in the 80's, 90's, and the Consignia days. The Unions successfully negotiated excellent deals and the restructuring pot was placed firmly in the Pension and away from the business. Some view this as crooked accounting others think they've got away with someone else paying the tab. Quite simply the debt and liability is now the taxpayers. This is

BT & RBS are big news and no wonder. Management forced through restructuring involving massive pension liabilities. They are not alone and eventually these amounts of money break companies as witnessed by BHS. The question with BHS is whether the previous incumbent who paid out huge dividends to BHS when allegedly standing behind the pension. Similar questions will be asked of all companies who offered final salary schemes. It was raised 10 years ago and slowly they been closed but faster, has been the growth of liability. Pensioners continue to live even longer, Stock Market returns have frustrated trustees and administrators, so guess what, these funds will run out of cash during the 2036. When I say run out of cash they will be obliged to tell pensioners earlier, but they will be out of cash and very few will be able to pay their liabilities in full during the 2030's.

Why my confidence? Its quite simple. If the individual companies generate a profit level significantly below that of their obligation to the pension fund for the shortfall then their share price will not rise, in fact it falls. Lack of stock market returns means it a vicious spiral. I'm away to crunch some numbers.