Bold steps alone will save this endangered species

Few customers are aware of their ownership rights and those prepared to exercise them tend to be a small, vociferous minority

What on earth did Anthony Nelson mean when he heralded a "new era" for building societies with publication yesterday of the second part of the Treasury review of rules and legislation governing the movement? Anything that improves flexibility, accountability and transparency among building societies has to be welcomed. Even so, it is hard to see what real difference these nine pages of watered-down proposals will make to a movement already in a state of near terminal decline.

Consider the following figures. In 1978 building societies accounted for more than 90 per cent of mortgage lending. With the banks now aggressively back in the market, Abbey National having already made the traumatic conversion to banking status, Cheltenham & Gloucester in the process of being acquired by Lloyds Bank, and the Halifax and Leeds societies about to merge and convert, that figure is being dramatically reduced. Within three years building society share of the market will be less than 30 per cent. Even among those societies that remain glued to their mutual roots, the net number of new loans is steeply on the decline. Small wonder that societies still awake enough to realise the world is changing are all talking about merger, conversion and takeover.

Mutual ownership is in many respects a fine thing. The idea of customers owning and controlling a business for their own benefit in the co-operative tradition is one that deserves to be supported and preserved. As it applies to building societies, however, it is in urgent need of reform. If nothing else Mr Nelson's proposals will go some way to addressing the many anomalies and distortions that have grown up in the way mutual status works in practice. There will be more accountability, a little anyway, more freedom to enter other businesses and more openness.

Ironically, the change that members will find of most interest is the ending of the distinction between shareholders and retail depositors. This is a change that will do little to support the mutual ideal but it will allow retail depositors to share in the cash bonanza that comes to members with conversion or takeover. The necessary legislative reform will probably come too late for the 3 million Halifax current account holders excluded under the present rules from membership, but presumably there will be benefit in it for someone at some stage in the future.

Few building society customers are in practice even aware of their ownership rights until conversion to banking status or a takeover is proposed. Building societies are as a consequence largely unaccountable to their members. The incentive to perform is limited to the competition of the marketplace. You can argue about how accountable PLCs are, too, but the City's appetite for long-term growth and dividends does tend to concentrate minds. Mr Nelson's proposals on accountability come nowhere near matching the demands of the marketplace. A much bolder and more radical approach would have been required to revitalise this increasingly endangered species. A new era? Hardly.

Death knell for generous pensions

For a gathering of actuaries, accountants and fund managers, the annual beano of the National Association of Pension Funds in Eastbourne was a pretty emotive affair. This may have had something to do with the quantities of alcohol flowing into the early hours of several mornings, but the underlying cause was that this traditionally discreet world of men in suits is facing dramatic changes.

After such an easy run in the 1980s and early 1990s, when vigorously performing financial markets did their work for them, pension fund managers are suddenly finding it tough going. Worse, they see little hope of improvement, assailed by rising costs, lower earnings, complicated legislation, changing employment patterns and ageing populations. In short, earning the money to cover the sort of generous occupational pension benefits Britons have been used to for generations is becoming increasingly difficult.

The message, whispered behind cupped hands, from the managers of funds belonging to some household names in British industry, is that the days of guaranteeing employees a generous pension based on their final salary are rapidly closing. Instead, people will be offered money purchase schemes, with pensions depending largely on how much individuals pay in over their working lives.

This is a dramatic change. What a money purchase scheme means is that if a person wants anything approaching a decent pension, instead of the company guaranteeing it as before, it will have to be built up out of large contributions from pay. Companies will have two classes of employees - those with generous guaranteed pensions, and those with far less take- home pay if they are going to make prudent provision for old age.

It is ironic that fund managers are blaming the best intentions of the Government to introduce greater security into pensions in the wake of the Maxwell scandal for being the final straw to break the back of final- salary schemes. The so-called Minimum Solvency Requirement will demand that occupational funds are at all times able to meet their obligations. For many companies, this means putting a lot more money in to bring funds up to scratch, and switching to a more conservative investment approach.

The temptation to escape from the burden of guaranteed final-salary pensions is becoming for many large companies well nigh irresistible.

Cake mix stirs corner-shop passions

As everyone knows, cakes can provoke fierce passions. If Greg Hutchings of Tomkins thought he could sneak his acquisition of Lyons Cakes through unnoticed, he's got another think coming. Britain's army of corner-shop owners are up in arms about it. Through RHM, Tomkins already owns Mr Kipling. It makes good commercial sense to acquire its main competitor, which among other goodies makes Lyons cup cakes.

Corner shops tend to stock little else in the way of cakes other than the products of these two companies. Even counting in supermarket buyers, the two account for more than half the branded cakes market in Britain. They are also the only two cake companies to maintain substantial door- to-door delivery fleets Mr Hutchings may have hoped otherwise, but it looks as though this one is heading for the Monopolies and Mergers Commission.