the times | Thursday November 26 2020 1GM 39
Business
Patrick Hosking Financial Editor
Millions of members of traditional
pension schemes will receive smaller
upgrades each year than they had
expected after the government pressed
ahead with plans to change the defini-
tion of the retail prices index, the classic
cost-of-living barometer.
Holders of index-linked government
bonds, which are linked to RPI, were
told that they would receive no com-
pensation for the change, which has
been estimated to cost them as much as
£100 billion over the decades to come.
Rishi Sunak offered one concession
yesterday when he announced that he
would not approve any change before
- In its consultation, the Treasury
sought views on changing the formula
from 2025.
The RPI has long been distrusted by
economists, who argue that because of
the flawed way it is calculated it over-
states inflation by 0.8 to one percentage
point per year. However, it is used as the
yardstick by which pensions paid out by
traditional defined-benefit schemes
are upgraded each year. Millions of
people, mostly already retired, are
beneficiaries of these schemes.
Other pensioners holding inflation-
protected annuities stand to be worse
off, while the change could slow the
pace at which some deferred pensions
— promises to former workers who are
not yet retired — are increased.
Members of public sector schemes
will not be affected because their
inflation protection arrangements
were downgraded from RPI to the
consumer prices index as part of wider
reforms in 2011.
The Treasury said that it wanted to
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Oct 28 Nov 5 12 20 Oct 28 Nov 5 13 23 Oct 28 Nov 5 13 23 Oct 28 Nov 5 13 23 Oct 28 Nov 5 13 23 Oct 28 Nov 5 13 2332,000
30,000
28,000
26,000More than £300 million was wiped off
the stock market value of Future after
the publisher of magazines ranging
from PC Gamer to Marie Claire rattled
investors by unexpectedly offering to
buy the owner of Gocompare.
Shares in Future dropped by 328p, or
16.7 per cent, to £16.34 yesterday after it
Investors see no Future after shock takeover bid for Gocompare
Ben Martin, Simon Duke revealed a cash-and-shares deal worth
more than £500 million to purchase
Goco, the London-listed price compar-
ison group.
It is the biggest takeover to date by
the highly acquisitive magazines pub-
lisher and comes amid a surge in deal
activity in Britain in recent months
after a lull caused by Covid-19. Yester-
day the AA agreed to sell itself to two
private equity groups for £219 million,
while Elementis, the chemicals special-
ist, spurned a £680 million bid and G4S,
the security company, continued to
fight off a £3 billion hostile offer.
While Future’s bid for Goco took
some in the City by surprise, Zillah
Byng-Thorne, the publisher’s chief
executive, said she was confident that
investors would come to view the take-over as a “fantastic deal”. She said: “I
really do think this deal should be
judged on where the share price is in six
months’ time and not where it is today.”
The offer originally put a price tag on
Goco of £594 million, or 136p a share,
but this had declined to about £519 mil-
lion, or 118¾p a share, at last night’s
close. Goco shares finished the day up
5.8 per cent, or 6½p, at 116½p. Thetakeover will lead to a windfall for
Sir Peter Wood, the multimillionaire
Goco chairman and insurance industry
tycoon. He holds a 29.7 per cent stake in
the company and has given an
irrevocable undertaking to accept the
offer. He will receive £41.3 million in
cash and will have a stake of 5 per cent
in Future after the takeover. Future
Continued on page 41, col 2Millions worse off under new inflation formula
Prices index
change will
hit pensions
see the RPI redefined to align it with
CPIH. This is the consumer prices
index adjusted to include owner-occu-
piers’ housing costs.
The Pensions Policy Institute has
calculated that members of defined-
benefit schemes that use RPI will be
about 9 per cent worse off over their
lifetimes. About 64 per cent of schemes
in the private sector are upgraded by
using RPI. Over 30 years, pensions
could be 20 per cent lower, Aegon, the
life assurer, estimated.
A 50-year-old today due to receive a
£10,000-per-year pension from aged
60 would be in aggregate be £75,000
worse off by the age of 90, according to
Barnett Waddingham, the actuaries.
The rejigging of RPI will create
winners, too. Student loan interest is
calculated using a formula linked with
RPI, while train fare increases are
partly determined by the same formula.
Holders of index-linked government
bonds have staged a long-running
campaign to see off the proposed
changes, which will gradually reduce
their interest payments and their
principal.
The Treasury surprised some
analysts by explicitly stating that there
would be no compensation for holders
of index-linked gilts, or “linkers”.
The impact on pension schemes will
be mixed. They will benefit from having
to lift pensions by a smaller percentage,
but will lose out from being invested in
linkers, which will yield less.
One of the biggest schemes, for
82,000 past and present BT workers,
calculated that its assets would be £1 bil-
lion worse off — which will put pres-
sure on the telecoms company to make
bigger deficit payments.ALAN DAVIDSON/SHUTTERSTOCKBell Pottinger partners still owe £1.8m
James Hurley Enterprise EditorPartners of Bell Pottinger have yet
to repay £1.8 million in “excess draw-
ings” that they took from the PR busi-
ness before its collapse, according to
liquidators.
An additional significant sum is
being pursued against an unnamed
partner via litigation, which alleges
breach of contract and “significant and
related excess drawings,” Matthew Tait
and Malcolm Cohen, the joint liquid-
ators from BDO, said in a progress
report.
Bell Pottinger, which was founded by
Lord Bell, who died last year, and Piers
Pottinger, was established in the 1980s
and grew to become one of Britain’s
best-known public relations firms. It
collapsed in September 2017 after a
scandal in South Africa, where it wasaccused of inciting racial hatred on
behalf of a client. The affair prompted
some of Bell Pottinger’s largest clients,
including HSBC and EY, to leave, which
precipitated its collapse.
The liquidators said that members of
the limited liability partnership had
“failed in their duty to act in good faith
and in accordance with standards of
good governance” and that the “rela-
tionship between the actions of these
members and the financial failure of
the LLP appears strongly correlated”.
Liquidators have been pursuing 44 of
90 former partners for £4 million of
profits they received from the partner-
ship before its failure, almost half of
which remains unpaid, according to the
latest filings at Companies House. Part-
ners have said that the drawings were in
lieu of salary payments.
Liquidators did not specify the valueof the additional claim for breach of
contract, or who it was against. The
prospect of a lawsuit against the estate
of Lord Bell has been raised previously.
James Henderson, former Bell
Pottinger chief executive, Victoria
Geoghegan and Nick Lambert, former
executives, are the subject of disqualifi-
cation proceedings from the govern-
ment’s Insolvency Service which could
lead to them being banned from hold-
ing directorships for up to 15 years.
The proceedings were issued in court
on September 11, the Insolvency Ser-
vice said. Hearings are expected to take
place next year. Mr Henderson has
vowed to fight the possible ban.
Mr Henderson, Ms Geoghegan and
Mr Lambert declined to comment. A
spokesman for the Insolvency Service
said: it would not comment further as
proceedings had been issued.James Henderson, the former Bell Pottinger chief, is facing a disqualification proceeding brought by the Insolvency Service