Heading off pensions disaster

AS the huge deficits in defined benefit pension funds pile up, ministers are engaged in a frantic effort to protect the interests of future pensioners caught up in failed schemes.

Tens of thousands of people who have paid into pensions over a lifetime are finding themselves up the creek without a paddle because of the lack of protection.

Safety nets exist for investors in defunct insurance companies and for depositors unfortunate enough to have cash tied up in collapsed banks.

But pensions are the cruel exception to this rule. With deficits building at hundreds of companies, there is concern that a major corporation could soon join those such as steel firm ASW, where future pensioners have been left high and dry.

Initial efforts to find a private insurance provider that would take on the risk have failed. The objective now is to devise a different kind of safety net. Aware of the political sensitivity of the issue, Tony Blair is thought to be taking a keen interest.

A two-tier rescue is planned. Members of pension schemes would each pay an annual premium of £25, which would buy them a degree of protection.

Firms running pension funds would also be required to contribute. There would be a sliding scale of charges - the bigger the scheme's actuarial deficit, the larger the payment required. This, it is hoped, would force companies to begin addressing the deficit problem in the manner of firms such as BT.

There will, of course, be objections to the government's hands being in the till. Some way will have to be found to segregate the funds in the scheme, perhaps through a trustee group such as Law Debenture, which will invest them for the benefit of those affected. But winning support for such a scheme (based around minimum protection of £10,000 a year) will not be easy.

The Treasury is fearful of an open-ended government guarantee that could open it to billions in future claims. But as it was partly responsible for the underfunding problem in the first place as a result of the tax on dividends, it should perhaps be willing to take a share of the responsibility.

Give Gent some credit
WITH the passage of time, it could be that Sir Chris Gent will come to be viewed as the John D Rockefeller of mobile phones.

The founder of Standard Oil recognised the potential of America's oilfields and gathered them together over a century ago. Gent has done the same for cellular phones.

This has required some great battles, such as that for Mannesmann, which bought it a leading position in Germany, and gambles such as the purchase of Airtouch, which left Vodafone as a minority holder in the successor company Verizon. It required a bold vision to recognise that high prices have to be paid for global leadership.

Gent triumphed because he funded so much of his expansion by issuing shares.

This makes the huge goodwill write-offs - £13.5bn last year and a further £14.1bn this time - more palatable. Anyone looking at the strength of turnover, margins and cash flow throughout the business must recognise that this is one telecoms group that has a good chance, one day, of making real profits.

But there are big decisions to make. The US minority interest needs to be sorted out. Vodafone must also face up to the reality that while it was important to win the next generation of mobile licences (3G), Gent, like everyone else, was caught up in the bubble psychology, paid too much, and his successors may eventually have to make some big write-offs.

Put all that aside and Gent must be credited with having created a world-class company, with £30bn sales, in very short order.

That is something Britain desperately needs. It is unfortunate that, having fought battles with investors over pay and taken a beating in the media, he is baling out when his management skills are most needed to take Vodafone to the next level. That is unfortunately the downside of putting all executives through the pay wringer.

Euro power
THE rise in the euro to a new post-launch high against the US dollar is not causing much concern to Hilmar Kopper, chairman of the supervisory board of DaimlerChrysler, and the man responsible for attracting overseas investors to Germany.

Kopper believes that German business can live comfortably with an exchange rate of $1.25 to the euro, and notes that even at $1.50 - the equivalent rate when the Deutschmark was at its peak - German manufacturing can still compete on quality.

There's confidence for you.