Pension critics lift their game

IF THE government had hoped that the Pensions Commission report would bottle up public debate about retirement until after the election it will be sadly disappointed.

Instead it has given critics the authoritative ammunition they have been looking for to attack government inaction and indecision.

This was evident in the Commons where Tony Blair found himself under fire from Michael Howard and his pensions guru David Willetts on two separate fronts.

Firstly, Blair had to defend the spread of the 'pensions credit' which the Pensions Commission said could be a disincentive to save and unsustainable over the longer haul.

Blair's response was to argue that they were a necessary measure to ease 'pensioner poverty', avoiding the issue of whether a more generous universal state pension was the answer.

The second line of attack related to the deteriorating state of private pension provision. The report makes it clear that the tax imposed on dividends in 1997 was one of the factors that contributed to the closure of 10,000 defined benefit schemes.

The City has been fired up by Adair Turner's pension report as well. My own conversations with fund managers suggest that they are not too keen on compulsory savings. There is more interest in improving the scale of voluntary saving through tax breaks, better transparency and investor education.

There is also a concern that forced saving will lead to commoditised fund management, which will not produce the best terms for consumers.

One proposal put forward by Morgan Stanley is that companies make better use of derivatives to hedge their pension fund risk. The investment bank believes that there is not a sufficient free market for long-term fixed income products to cope with unhedged pension liabilities.

Whether members of pension schemes would be happy with trustees taking huge bets on their retirement prospects is somewhat doubtful.

Sarin shake-up

THE big question about the executive reshuffle at Vodafone is what took the company so long?

It seems extraordinary that years after the mobile phone giant went on its great international spending spree so much power was devolved to the regions. That can be a recipe for disaster in global companies - as we saw at Shell.

So, 15 months into his stewardship chief executive Arun Sarin has decided to grasp the nettle and seize more centralised control with all regional units now tuned into headquarters at Newbury, Berkshire.

This is sensible for two reasons. At the group's recent open day for investors it made much of its promise to deliver £2.5bn of costs reductions and revenue improvements. Much of this cash is to be freed up by cutting out duplicated management functions in the operating companies.

Moreover, the firm is about to move to a new critical stage when it seeks to make its fantastic investment in third-generation licences around the world pay. It makes sense that it offers the same services and equipment in all markets rather than to roll them out in a disjointed way.

Some people might question the ability of one person to handle all of this responsibility in an £89bn company. This is especially true in a firm that still needs to be closely focused on mergers and acquisitions, notably minority holdings in critical markets from France to the US.

Some of this responsibility will fall to Sir Julian Horn-Smith, who becomes deputy chief executive. Two years ago Horn-Smith harboured hopes of taking over from Sir Chris Gent.

There seemed to be less enthusiasm in the City about the recall from Verizon Wireless in the US of Andy Halford as finance director. Investors had hopes of a City heavyweight to counterbalance Vodafone's inward-looking management culture. That, one supposes, might come when Lord MacLaurin finally decides to call it a day.

Sir John Bond, who recently joined the board, may one day require a retirement job - if he can ever tear himself away from HSBC.

Abbey go-ahead

SO Abbey shareholders can all breath a huge sigh of relief. Banking sleuths at the Financial Services Authority have given the green light to investors to approve the takeover by Spain's Banco Santander at today's extraordinary general meeting.

This despite the fact that the FSA's three-month statutory period for making the decision has not expired.

It is nice to know that they are so confident that the actions launched against the group's chairman Emilio Botin by Spain's judiciary amount to nothing.

If only the FSA was so confident in sorting out Britain's splits scandal.

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