Arcadia tightens pensions terms - papers 5th January

THIS MORNING’S papers are full of reports on Arcadia’s decision that its 3,600 members of staff must work longer and pay more if they want to keep their current final salary pension scheme.

ACCORDING TO the Financial Times, Philip Green's Arcadia retail group and the Co-operative Group yesterday joined the ranks of British companies seeking to control the soaring costs and risk of final salary pension schemes. Both companies have altered the terms on which employees can earn future pension benefits.

At Arcadia, staff received notice that future benefits will require them to increase their contribution to 6% from 4% of their pay and work until they are 65 - up from the previous retirement age of 60 - in order to maintain current benefit levels.

Green, chief executive of Arcadia, told the FT the changes would only affect staff in the main part of the scheme and would not apply to the section for senior executives. Mr Green, who paid his family a £1.2bn dividend from the company in October, said he was not a member of either scheme.

MEANWHILE, the Times also reports Green is watering down the future pension fund benefits of thousands of staff in his main retail group, Arcadia, and revealed to the paper yesterday that he has similar plans for BHS.

As well as facing a rise in the retirement age from 60 to 65, staff are also being asked to make bigger contributions or face reduced payouts.

In a third move to whittle down future benefits, the paper says Green is stripping the scheme of its inflation-proofing. In future it will match rises in the cost of living only up to 2.5%. At present the figure is 5%.

Green said that his dividend was irrelevant and he emphasised that, unlike many other final-salary schemes, the Arcadia fund was in good shape, with no deficit.

CONSUMERS ARE increasingly reluctant to borrow money, Bank of England data showed yesterday, but mortgage lending is picking up strongly, indicating the worst may be over for the housing market, reports the Guardian.

The Bank said unsecured credit rose by just £927m in November, the smallest increase in almost five years and one that economists say is likely to keep the lid on consumer spending in coming months.

A recent survey showed consumer confidence is at its lowest in more than two years. And retail data suggests that spending was reasonably strong in the run-up to Christmas but may have tailed off since.

By contrast, the Bank said mortgage lending rose by an unexpectedly strong £8.7bn. There were 115,000 new mortgages approved in November - the most since May 2004 and a rise of more than 50% over the previous November.

This is the latest data to suggest that the property slowdown of 2004 and 2005, which saw the annual rate of house price rises slow to 3% from 17%, may be over.

HEDGE FUND managers, some of the City's highest paid traders, face slashed performance fees as the sector loses money and investors, a leading academic said yesterday, reports the Telegraph.

Narayan Naik, the director of the London Business School's Hedge Fund Centre, said overcrowding was putting increasing "downward pressure" on the fees and new funds entering the market would find it particularly difficult to raise them.

The BNP Paribas-sponsored centre's research has shown that between 60% and 70% of the world's estimated 8,000 hedge funds charge 20% performance fees on returns above pre-determined highwater, or benchmark, levels on top of a 2% flat management fee.

Naik added it was hard to determine how quickly the average fee level would fall or to what level, "but the chances are it will be around 17.5%".