Michael Harrison's Outlook: The appetite to save is still with us, but it's a matter of encouraging the right kind of saver

A wrong-headed ruling on asbestos; Bid ahoy! as P&O battle hots up
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Who said that the British have lost the saving habit? Nearly £24bn flowed into the coffers of Legal & General last year - cash which could broadly be described as money destined for the long-term savings market, whether it be pension schemes, life bonds, unit trusts or ISAs. L&G's figures follow similar, if not quite such spectacular, increases for Prudential.

There are a number of factors behind the rise in savings. One is the simple fact that there has been a huge amount of discussion and publicity over the past year about the savings gap and the need for people to make better pension provision. Another is the looming A-Day deadline in April which has encouraged savers to put as much money away as possible to take maximum advantage of the tax breaks available.

A third is the slowdown in the housing market, which has made other classes of asset more attractive as savings vehicles. And a fourth, of course, has been the recovery in equities and the restoration of confidence in the stock market.

But the fact remains that this savings surge is still confined to a relatively small section of the population, who could be described as active investors. It has not reached the millions of people with inadequate or non-existent pensions provision. Lord Turner's proposals for auto-enrolment into a National Pensions Saving Scheme (NPSS) are designed to tackle that problem.

But as L&G's Tim Breedon points out today (see story on page 48), there is an awful lot of work to be done if Lord Turner's idea is not to go the same way as the Government's ill-fated stakeholder pension.

Like the stakeholder, it will in the end be the job of the private savings institutions to deliver the NPSS. The industry's biggest worry concerns the amount that it will be able to charge. The Turner report proposed a rate of just 0.3 per cent. But at that level, it is difficult to see how the likes of L&G and Prudential could offer schemes, particularly if they were required to give advice alongside the product itself.

Stakeholder failed not because of the shortage of schemes but because of the dearth of interest. The original concept was that they would grow a bit like index funds to be so huge that they would be profitable and viable at very low commission rates. But even with charges of less than 1 per cent, L&G has not been able to make a go of stakeholders except in a very few cases.

Auto-enrolment - or soft compulsion as it has also been called - should ensure much greater take-up of the NPSS. But only if the Government throws its weight behind the scheme properly. That means a drastic reduction in the amount of means testing that goes with state pension provision in order not to discourage private saving. It also means ensuring a balance between what employees and employers contribute.

It would be a shame if the Government wasted a lot of taxpayers' money building another savings vehicle but then forgot to put the engine in again.

A wrong-headed ruling on asbestos

Asbestosis is a horrible disease. A form of cancer which attacks the membrane lining the chest, it causes breathlessness, acute pain and ultimately death. It is sometimes preceded by a benign medical condition known as pleural plaques. These are areas of scar tissue which form in the chest lining and diaphragm and are an indication of unprotected exposure some time in the past to asbestos. Thousands of people have the condition. Not all of them will go on to develop asbestosis, but it is a sure sign that they are in danger of doing so.

Last February, the High Court in Manchester ruled that sufferers of pleural plaques had the right to seek compensation for the psychological stress caused by knowing it could be a harbinger of a lingering and painful death. Yesterday, the Court of Appeal overturned that ruling, on the grounds that a medical condition which had no impact on health could not be compensated.

The insurance industry was understandably cock-a-hoop, declaring that the judgment served as a stark warning to ambulance-chasing claims firms who prey on the fears of workers who may have been exposed to asbestos. Indeed, in most cases, those with pleural plaques will have become aware of the condition only after the scan van turned up outside their workplace and they were invited to undergo tests.

In America this has become big business, which is why in this country the Association of British Insurers was so pleased that the Court of Appeal had put a stop to this latest example of the "compensation culture".

Yet it is not quite as simple as that. Pleural plaques are a marker of unprotected exposure to asbestos, almost invariably as a direct result of negligence on the part of an employer. It can take 20 or even 50 years for that negligence to manifest itself in the form of a serious disease, at which point it may be hard to find witnesses or locate the employer's liability insurer.

As it stands, the Appeal Court ruling in effect means that a sufferer of asbestosis cannot begin the often long-winded process of claiming compensation until they have contracted the disease - by which time they may not have long to live. It is the medical equivalent of the Government's new pensions lifeboat, which has so far paid out to only 13 people, leaving some of those eligible for compensation to die in the meantime without ever receiving a penny. The average payment that sufferers of pleural plaques have received up until now of some £3,500 hardly amounts to a king's ransom. More important than the money, however, is the fact that it establishes negligence should someone with the condition then go on to develop asbestosis. That, in turn, can help speed up the payment of proper compensation.

No one wants to see the kind of litigation mania which has developed in the US take root here. But pleural plaques hardly fits into that category. The case is now headed for the House of Lords where it is to be hoped a more sympathetic view will prevail.

Bid ahoy! as P&O battle hots up

The board of P&O seems to have been all at sea when it came to working out the value on the ports and ferries company it runs. Last November it recommended an offer from Dubai's DP World worth £3.2bn. Yesterday it was obliged to switch its recommendation twice. In the morning P&O came out in support of a rival £3.5bn offer from the Port Authority of Singapore. But by the evening it had changed course again to back a near £4bn offer from Dubai.

The hedge funds, on the other hand, have judged the unfolding contest beautifully. P&O shares closed yesterday at 522p. Dubai's increased offer worth 520p landed two hours later.

How much firepower the Singaporeans have left is hard to know. Since these are two state-owned bidders vying for what is a strategic asset, normal valuation rules have long since been thrown overboard.

Perhaps the best clue to how much the Singaporeans might yet pay will lie in where the P&O share price opens this morning.

m.harrison@independent.co.uk

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