Jeremy Warner's Outlook: Is no company immune from the foreign invasion as Ferrovial takes a tilt at BAA?

Pensions debate: a charging matter; Pension liabilities: just slice and dice
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Yet the Government gave up its golden share three years ago, and provided Grupo Ferrovial and its private equity partners are prepared to pay the requisite premium, there would appear to be nothing to stop them from walking away with the prize.

From a public interest perspective, is this entirely wise? We haven't yet seen a proposal, let alone the detail of it, so it's obviously too early to judge, but already there are key concerns. One is the peculiarity of Spanish tax law, which allows Spanish companies to offset the goodwill costs of overseas expansion against domestic taxes.

It's one thing for Banco Santander to use the tax break to help fund its acquisition of Abbey National, or even for Telefónica to do the same with O2, but when the target is the nation's key airport authority, this effective subsidy from the Spanish taxpayer to their champions of the corporate stage begins to look more than questionable.

Furthermore, there is no place in the world where it is more difficult to get approval to build new air transport infrastructure than the south-east of England. It's hard enough for a once Government-owned British company to navigate these waters, so goodness knows what Grupo Ferrovial would make of them.

Then again, there is nothing that obliges BAA to build new runways and terminals at all, yet with capacity filled to bursting point, the national economic interest plainly demands it does, or at least that someone does.

The Stop Stansted Expansion Campaign yesterday welcomed Grupo Ferrovial's interest on the grounds that the Spaniards might be less inclined to invest in a second runway at Stansted than BAA. As professional investors in established infrastructure, the interests of these bidders would seem to be rather that of sweating the existing assets than investing in the exceptionally long pay back times of new ones.

It's no accident that Britain is home to the biggest low-cost airline sector in Europe; in large measure it's down to the infrastructure put in place by BAA. Can Grupo Ferrovial and its rumoured partners of Goldman Sachs, Deutsche Bank and others, be relied on to build on this legacy? It's not readily apparent they can.

Even if the Government were not already worried enough by the gathering treasure hunt by foreign interests among the biggest names in UK industry - can it be long before Rolls-Royce gets the knock at the door? - This latest endeavour raises more specific concerns aplenty.

Pensions debate: a charging matter

Hurry, hurry. Only a few days to go for submissions to the Government's pensions White Paper. Two of the most important of these - from the Association of British Insurers and the National Association of Pension Funds - are handed in today, and intriguing reading they make too.

For the ABI's members in particular there is much at stake. If proposals from Adair Turner's Pensions Commission for a National Pensions Savings Scheme (NPSS) are accepted, they stand to lose a considerable chunk of their business.

This is because a state-administered pension scheme is likely fast to become a substitute for all but the more generous of alternative, privately sponsored forms of pension provision. The challenge laid down to the industry by Lord Turner is to come up with a costing for a private sector solution that would be as cheap as the 0.3 per cent annual charge envisaged for his own NPSS. Lord Turner reckons that an annual charge as low as this could deliver a pension in retirement 25 to 30 per cent higher than that typically provided by personal pensions as they now stand, with their much higher annual charges.

Yet the key question has always been whether the NPSS would in practice deliver 0.3 per cent. The ABI has had the accountants Deloitte crunch the numbers on costings and thinks Lord Turner is at the extreme end of optimistic. Gut instinct alone, never mind the Government's appaling record in managing big IT projects, tells you it cannot be done.

On the ABI's assumptions, the true cost would be 0.45 per cent, and possibly more. So is that the number the ABI's members think they can do it for? Er, no, not exactly. In fact the ABI is reluctant to put a number on it at all, preferring instead to say that provided the present regulatory obligation for point of sales advice is removed, members could do it for around half the present average cost of stakeholder pensions, which is about 1.2 per cent.

It seems unlikely that 0.6 per cent, around twice what Lord Turner promises, is going to be greeted with riotous applause in the corridors of Whitehall. There's little appetite in Government for the creation of a state-run quango to manage the NPSS, with the risk that if things go wrong, it will be ministers that get blamed. Yet the sort of "let the markets decide" approach suggested by the ABI, or the alternative of having the price determined on a variable basis by an independent economic regulator, isn't going to pass muster with the Government either.

The ABI approach seems to have clear advantages over that suggested by the National Association of Pension Funds of a series of industry or regionally based pension trusts. This looks too complicated to me, even though the NAPF reckons it can deliver at less than a 0.5 per cent charge. Yet to succeed, the insurers are going to have to submit themselves to a price cap, and in order to appeal, it will have to be 0.5 per cent or lower.

The auto-enrollment system of "compulsion lite" saving envisaged by Lord Turner is tantamount to a tax. If there is to be a private-sector solution to delivery it will have to be bomb-proof, on charges and much else besides. Let's have an economic regulator by all means, but no Government in its right mind will commit to a private-sector approach without first knowing what the charge might be.

Pension liabilities: just slice and dice

According to those who monitor these things, there has scarcely been a day in the past year when the pensions crisis hasn't figured in some shape or form in the national press. It's had almost as many mentions as Kate Moss.

This must have raised public awareness to some degree, but how would you feel if you suddenly discovered that your pension rights had been sold off to an obscurely named Bermudan insurance company or perhaps the Abu Dhabi investment office? Unpalatable though it may sound, this is very likely the future for large tranches of our major public companies' pension liabilities.

There has long been a market - dominated by Legal & General and Prudential - for the bulk purchase of annuities, but insurers have tended to steer clear of anything as high risk as deferred annuities and shunned altogether the idea of taking on the liabilities of active members in defined benefit pension schemes, however much is offered to do it.

Now at least five new vehicles, from the former Prudential executive Mark Wood to the insurance giant Aviva, are planning to break into this market. The promise is that by using the techniques of today's capital markets to slice and dice pension risk, in the same way as has been applied to credit risk for some years now, they can underwrite the liabilities for a good deal less than the pension trustees.

If they are as good as their word, it will be the answer to many a finance director's prayers. The first of these vehicles should gain regulatory approval and be up and running by the summer. But can they deliver? We'll see.

j.warner@independent.co.uk

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