Private Investor: Rolls-Royce recovers to power a portfolio towards the sky again

Like, I imagine, most other shareholders in the company, I was awaiting Rolls-Royce's results, announced on Thursday, with a very heavy heart. Over the past few years we have had worry after worry and setback after setback. We all know about 11 September, 2001; the pension fund's "£1bn black hole" as it was invariably headlined; Iraq. The usual worries about competition from the US and the captious ways of the European aerospace industry, if I can put things politely.

I have kept faith with Rolls, buying on the dips and keeping up with its scrip dividend scheme, but the shares just seemed stubbornly to stay close to or below the 170p mark, which happens to be the price at which the firm was privatised in 1987. So what a pleasant surprise when Rolls unveiled some excellent news for a change. On a day when the FTSE was dragged lower by lacklustre results from GlaxoSmithKline, in which I have a holding, Rolls-Royce was a runaway performer, soaring 12 per cent and hitting a two and a half year high, back over the two quid mark. So I think I must be about quits on this one now, which isn't earth shattering, but I am glad I didn't sell when they went to about 100p. A few more results like this and investing in the British engineering industry may almost seem like a good idea.

So let's hope that when Rolls-Royce says that its earnings will keep growing in 2004, with the lucrative after-sales market picking up, it will deliver. The recovery in global stock markets will also alleviate the pensions problem, and I note the staff have made the sensible decision, albeit narrowly, to accept some painful changes to the fund.

Of course that's easy for me to say, because I'm not a Rolls pensioner or employee, but I do think that those changes were necessary to secure the future of the company.

It must have been a tough choice for the staff who have been through a lot recently, but they did the right thing. The company's survival as an independent premier company is not quite assured, but it seems a good deal safer as an investment and as an employer. The order book is up nine per cent to a record £18.7bn.

The curious thing which I have yet to digest properly is the substitution of the cash dividend, and presumably the associated scrip issue I subscribed to, with the issuing of "B" shares in lieu. I assume it's tax-efficient or something, but I'm not sure I like the look of it.

I've no money to invest in shares right now, as I am still getting over paying my (self-assessed) tax bill and property repairs. However, I am still paying into my pension schemes and am pleased that the Government is doing something to restore faith in saving for retirement.

The economic effects of the reluctance to save are appalling. It is at least part of the reason for the recent boom in house prices, as many feel that only bricks and mortar can be relied upon to look after us in our old age, with all capital gains completely tax free. That is not, by the way, an argument for applying CGT to principal residences; rather for the reduction of taxation on pension funds. Fat chance under this Chancellor, but I thought I might as well clarify my own position.

Next year, I have decided I would quite like to try and set up my own self-invested pension plan, or SIPP. Once you've paid a financial institution or adviser, for the "wrapper" you can do what you want with the money, within the rules. You have to pay someone for the wrapper to comply with Inland revenue regulations. It isn't that I'm necessarily disaffected with my pensions providers, more that I feel happier if I achieve a degree of plurality in my personal pension provision. Or, as the old saying goes, I don't like to put all my eggs in one basket. Those who relied heavily on Equitable will know what I mean. And if you can't trust yourself to look after your money, who can you trust? Anyway, I'm on a roll and the portfolio's on the up and up.

s.o'grady@independent.co.uk