Standard's change of life

STANDARD Life's decision to go for a public flotation has come more swiftly than anyone could have believed. At the start of the year it was still sticking with mutual ownership, even with the Financial Services Authority breathing down its neck.

Now it is seeking to make changes at breakneck speed. As we reported on these pages last week, the process of demutualisation will not be straightforward.

Chief executive Sandy Crombie needs to take an axe to costs against tough conditions for new business. Over the next 12 months, 1,600 jobs will go in every part of the business from sales to IT.

International ambition is being trimmed, too. Crombie took Standard into Germany in 1996 and he intends to keep that Continental business running. But plans to conquer France will be abandoned.

Headhunters are looking for a new chief of life and pensions. In the past this was the kind of job that would have been filled internally. Now Standard is looking for someone with strong plc experience. Indeed, the right person might eventually become Crombie's successor.

Standard Life's change of direction reflects the new climate in the British savings industry. The endowment scandal and government efforts to clamp down on the charges on long-term savings products have undermined traditional life products which now account for just one sale in eight. This means that as a mutual the life fund would have become the tail wagging the dog.

Similarly, new 'realistic accounting' standards have toughened capital requirements. Standard may well take the chance to strengthen its equity base when it eventually floats in 2006. Members will clearly be rubbing their hands at the prospect of windfalls. Past life demutualisations have seen the biggest payouts going to the longest- standing policyholders with the largest sums invested.

Whichever method Standard chooses, it should mean some recompense for the reduced bonuses and the period of uncertainty which followed its dispute with the FSA.

BT pressure

WHO would want to be Britain's dominant telecoms provider in the current deregulated market? The challenges are coming from all sides. The latest is from firms such as Carphone, which piggyback on BT landlines.

The new beefed-up communications regulator Ofcom, headed by former NTL boss Stephen Carter, has decided it does not like BT's new residential tariff, designed to take on the newcomers.

Following vociferous complaints from these rivals, Ofcom is deploying Competition Act powers to launch its own investigation into BT's new line rental and call package.

BT is promising full co-operation with the inquiry. But it has serious concerns about what is happening. It thought that the new tariff had already been clearly explained to regulators and no serious objections were raised, so it has been caught by surprise. There is a fear that Ofcom is simply flexing its muscles to let it be known that it is on the case.

In terms of immediate consumer benefit, the new BT tariff will mean combined lower call and rental charges for up to 20 million customers.

But its behaviour is seen by rivals as anti-competitive, since the rental charge has been raised for those 2.5 million phone users who have signed up for services provided by Carphone, Sweden's Tele2 and the like.

If Ofcom were to find against BT it would be yet another serious setback two decades after privatisation. Sir Christopher Bland and his chief executive Ben Verwaayen may have solved BT's acute debt problems. But they face huge difficulties in core markets which are dragging the share price ever lower.

Pensions pain

MAYFLOWER'S plunge into administration casts a pall over Britain's engineering sector. The broader impact is being seen with Henlys, an equity partner in the TransBus subsidiary, warning that it will make a £71m provision. The difficulties for manufacturers are in sharp contrast to the boom we are seeing in services.

The sharpest setback will be for long-term Mayflower employees who have spent a lifetime paying into the pension fund.

Wind-up rules require annuities to be bought for existing pensioners (including former managers) before future pensioners are paid. There have been fears for some time that eventually a large company would go belly-up, leaving the workforce high and dry.

Unless the government comes up with an interim deal to bail out insolvent funds, it will undermine the nation's belief in saving for retirement.