Parent power is the key

FIGURES from the Inland Revenue this week showed that the number of people aged between 16 and 35 paying into personal and stakeholder pensions had slumped from 2.35m to just over 2m. This, it was suggested, is further evidence of the looming pensions crisis.

I, however, am astonished that anyone under 35 has contemplated saving for a pension. You have to be very odd to think about pensions before you are 40, because it is only then you begin to contemplate the possibility of being mortal.

It is also only well past the age of 40, when student loans have been paid off, mortgages are reducing and an end can be seen to the ferocious financial burden of educating children, that people have any money to set aside for themselves.

Indeed, in the future they may not manage to save even then because in the absence of inflation the colossal mortgages people now take on will prove to be a much greater financial burden throughout their lifetime, than for my generation when the debt was simply inflated away.

We ought as a society, therefore, to be thinking how to cope with saving much less. To this end, I was intrigued by an idea from Max King, an investment consultant with Investec, who proposes that well-heeled parents should be allowed to make payments directly into their children's pension funds free of inheritance tax.

It would cost the Exchequer some money now - IHT is not a great money-spinner - but it also would ensure that at least one element of the next generation would not be a burden on the State in their old age.

Property point

TAKING time off from looking for acquisitions with which to bulk up his business before it floats in a few months' time, John Duffield, founder of fund management group New Star, told me last week that sales of his commercial property unit trust were running streets ahead of any of his equity products.

This suggested the public still don't trust equities. They see bonds have had a good run but with interest rates moving up the best is probably behind them, so while property too has enjoyed its bull market, it still looks a better bet than the others.

The experience is repeated elsewhere. Standard Life attracted so much money looking for a home in commercial property that it has had difficulty getting it into the market.

Estate agents and surveyors such as Knight Frank in London similarly report significant investor interest, not just from the UK buyers but from mainland Europe, particularly Germany. They were around last year and their appetite is undimmed despite the higher prices.

It seems yield is the key. Like retail investors here, overseas institutional investors and pension funds don't trust equities, have already filled their boots with corporate bonds but are still looking for a 7% yield to meet their commitments. That does not leave them a lot of choice and has the added bonus that their trustees like the solidity of property.

History would suggest that all this money pouring in is a definite warning sign that the market is about to crash. But in fairness there is no sign of it. Might be a good time to get rid of the poorer stuff, though, and try only to buy quality.

Cazenove cut

THINGS have gone quiet on the Cazenove front, which suggests the deal that would bring the firm under the umbrella of JP Morgan is getting down to the hard bargaining on price, equity shares, who goes, who stays, and for how long.

But when all is said and done, the Cazenove side will be lucky to clear £500m down and the possibility of another £250 million on an earn-out.

They might think their business is worth more but the firm has been in play effectively since it announced, then shelved, its plans to go public and each on-off courtship since has stripped away a bit more of its credibility.

It risks serious loss of face if it is jilted again, and no doubt a desire to avoid that is why most shareholders will sign up to a JP Morgan deal, even through gritted teeth.

It does mean, however, that institutional investors who accepted shares valuing the business at £1.1bn will have to take a haircut. That will not please them but they may well be a lot less displeased than Cazenove's partners. They, I hear, turned down an offer in 1999 from Goldman Sachs which in those heady days priced the firm at £2bn. It was that benchmark which made £1.1bn seem a bargain a few months later.

Bad news for them, but it is heartening in a way to see Cazenove's famous market savvy clearly has not been applied to its own business.

Even blue-blooded cobblers' children, it seems, are the worst shod.