Today, about 600,000 low-paid workers get a pay cut. It’s only 1 per cent, and the pensions industry hopes they’ll behave like frogs in cold water on the stove, and not notice until the 1 per cent becomes a hot 4 per cent. By then, 11 million other poor frogs will have joined them in the soup. Half of them have no idea what’s coming.

They can blame “Red” Adair Turner’s pension review. After a McKinseyite analysis of the pension problem, he plumped for compulsory contributions. Starting with the biggest companies, every employer in the land will eventually be obliged to put employees into a scheme.

Executing this, and keeping track of contributions among the shifting mass of the lower-paid, promises to make computerising the NHS, a task which absorbed billions of pounds before it was abandoned, look simple. A sixth of workers loose track  of their pension funds on changing jobs, and the new rules will eventually apply to smaller companies (which may go out of business) and industries like cleaning and construction, where job continuity is the exception.

More baleful still than the imposition of this third income tax is the delusion that penny-packet payments add up to a comfortable old age. To retire solvent before you’re past it requires savings of about 20 per cent of salary every year. The new rules demand 8 per cent, with half coming from the employer.

It may be that the National Employment Savings Trust (NEST) the default home for the funds, will somehow turn the base metal of tiny contributions into a golden sunset, even after costs, but it would be unwise to bet on it. If workers are quick, they can opt out of compulsory contributions before they are locked in. But their employer is not allowed to encourage them, and few of the unfortunate frogs in this particular pot are likely to read the FT.

My car has a short circuit

The car in front is a Toyota, which is why it still has an exhaust pipe at the back. The world’s largest carmaker has found that even Japanese technology can’t beat the laws of thermodynamics, and has pulled the plug on its electric eQ minicar. It promises to be almost as rare as the gull-wing DeLorean after Takeshi Uchiyamada, Toyota’s vice chairman for vehicle development, admitted to “many difficulties.”

You bet. He could have pointed out that electricity is not a power source but a transmission mechanism. After the inevitable thermal losses in generating, wiring, storage and motive power, the electric car is a desperately wasteful way of using the energy in a barrel of oil. Instead he chose to blame disappointing battery technology. That, at least, should improve over time.

Unfortunately, the laws of thermodynamics won’t, and a car stuffed with exotic batteries will always be expensive to run – and insure, since it presents a tempting target to metal thieves, which is why the car in front will have an internal combustion engine, whether it’s a Toyota or not.

No accounting for takeovers

Goodwill, as the accounting textbooks don’t tell you, is the difference between what something’s worth and what you find you’ve paid for it. If the acquisition is small enough, with luck nobody will notice the write-off in the alphabet soup that is today’s p&l account.

If it’s too big to hide, well, an embarrassment shared is an embarrassment halved, so Europe’s 600 biggest companies wrote off a stonking E76bn of goodwill last year. This is, effectively, extra money handed to the vendors of the companies which Europe’s big boys bought. Over the last four years, Houlihan Lokey calculates, these companies spent E1.6tn, of which they subsequently wrote off E219 billion. Since the full horror of the dud acquisition can take several years to emerge, that probably understates the true overpayment.

As the Sage of Omaha oft remarks, takeovers enrich advisers, selling shareholders and their executives, who are paid to go away. Those at the bidder gain an exciting distraction from the tedium of the actual business, and pay rises for running a bigger empire, all at the expense of their shareholders. No wonder they are not interested in learning from history.

 

http://www.ft.com/cms/s/0/4eb05ede-0959-11e2-a5e3-00144feabdc0.html#axzz2830jGpUJ

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