***The mis-selling scandal of the decade
***Unemployment sees biggest jump for nearly 14 years
***RECOMMENDED ARTICLES: Do rising commodity prices cause wars?… How Slovakia became a great place to do business…
It’s shaping up to be the mis-selling scandal of the decade.
In the region of 85,000 people have lost a massive chunk of their savings and been condemned to an impoverished retirement. And all because of bad financial advice.
So why aren’t MPs baying for blood and calling for heads to roll across the financial services industry?
Because in this case, it’s the MPs themselves who are responsible for delivering the dodgy financial advice…
The Parliamentary Ombudsman, Ann Abraham has accused the Department for Work and Pensions and other Government bodies of providing “inaccurate, incomplete, unclear and inconsistent” guidance on the security of final salary corporate pension schemes “over many years”.
“Government has a unique responsibility in these matters. Government set the pensions policy framework and took upon itself the responsibility of providing information for the public,” said Ms Abraham.
Basically she says that the Government, and the DWP in particular, painted an unduly rosy picture of the levels of protection provided to those investing in corporate pension schemes, and failed to warn people of the risks if their companies went bust.
This “maladministration” has “caused injustice to a large number of people who, as a result, lost the opportunity to make informed choices about their future.”
She recommended that the Government pay compensation to those whose schemes went to the wall between 1997 and 2005. That’s not a small ‘ask’. The Pensions Action Group reckons that compensating members of the 400 or so company pension schemes that have gone to the wall so far would cost £5bn in total. Tony Blair told Parliament that costs could rise to as much as £15bn.
The Government has rejected the report out of hand, saying it cannot be held responsible for corporate pension schemes. It’s only the fourth time in 40 years that the Ombusdman’s findings have been rejected.
The Government’s main argument against Ms Abraham’s findings is that the DWP’s various information leaflets probably weren’t read by most of the complainants anyway. And even if they did read them, they were meant “for general guidance only”.
But it’s hard for the Government to start arguing that people should be taking more personal responsibility for their investments. For of course, it’s the same Government which also insists that those working in the financial services industry hold consumers’ hands through every step of the investment process.
And although the DWP has rejected the Ombudsman’s recommendations, several unions have said that they will take the Government to court to enforce claims for compensation.
It all adds up to another potential public spending headache, arriving just in time for Gordon Brown’s Budget next week. And as if the Chancellor needed any more bad news, unemployment also saw its biggest jump in February since December 1992. The number of people out of work and claiming benefits rose by 14,600 to 919,700.
That process doesn’t look set to go into reverse any time soon. High street bank Lloyds TSB announced it is to cut 566 jobs across the UK as it tries to cut back office costs. The cuts will begin this month and are set to be completed by March 2007.
And if you’d like to refresh your memory before the Budget, you can read more about Gordon Brown’s less-than-sparkling track record on our website here: Into the red with Brown
Turning to the stock markets…
The FTSE 100 rose 14 points to 5,965. Miners were among the main risers as metal prices picked up. Antofagasta rose 5% to £20.65, while Kazakhmys and BHP Billiton were also strongly ahead. For a full market report, see: London market close
Over in continental Europe, the Paris Cac 40 gained 10 points to 5,127, while the German Dax climbed 27 to close at 5,898.
Across the Atlantic, US stocks moved higher as the Federal Reserve’s ‘Beige Book’ survey of economic conditions around the country found that inflation pressures were muted while growth remained steady. The Dow Jones rose 58 to 11,209, while the S&P 500 rose 5 to 1,303. Both are at their highest levels since May 2001. The tech-heavy Nasdaq climbed 15 to 2,311.
In Asian trading hours, oil was a little lower, trading at around $62 a barrel in New York. Brent crude was also trading at around $62 a barrel.
Meanwhile, spot gold was trading at around $550 an ounce. Silver rose as high as $10.30 an ounce before easing back to around $10.25 an ounce.
In Asian stock markets, the Nikkei 225 slid 222 points to 16,096. Banks like Mitsubishi UFJ Financial and property developers were among the main losers on fears that the Bank of Japan will hike interest rates sooner than expected.
And in the UK, life insurer Prudential has reported annual results ahead of City hopes. Operating profit for 2005 came in at £1.7bn, up 33% on 2004.
And our two recommended articles for today…
Do rising commodity prices cause wars?
– It’s commonly assumed that commodity prices rise in times of war because of disruption to global trade and the need for raw materials to feed the war machine. But as Marc Faber points out in Whiskey & Gunpowder, this is the wrong way round. Rising commodity prices are actually the root cause of many wars – and the theories of a well-respected economist back him up. To find out why the struggle for resources threatens the West’s position as the dominant global power, see: Do rising commodity prices cause wars?
How Slovakia became a great place to do business
– Slovakia has gone from being a poor eastern European state with a huge underground economy to a successful EU member attracting inward investment from the likes of Peugeot and Hyundai. How? By introducing a flat tax, says Steve Forbes in The Daily Reckoning. To find out why France and Germany should do the same, click here: How Slovakia became a great place to do business