This week’s message from the Confederation of British Industry: we’ll just die and then you’ll be sorry. I take this as more of a threat than a promise, but since it is all about pensions, anything is possible. Many (perhaps most) of the CBI’s member companies must now be stuck with underfunded pension schemes, the regulators want to set them a timetable for topping up their funds, and the CBI says that if this is taken literally, one company in every five will be put out of business. A perverse logic would work itself out: overstretched companies and underfunded schemes are always likely to go together. Companies like these would be required to find more cash in more of a hurry. They would also have to contribute loaded payments to the Pension Protection Fund. Some of them would run out of cash and go bust. Their pension promises would then become a charge on the protection fund, whose managers would have to call for more money. Other companies would, of course, have to provide it. For those nearest the edge, this call would be enough to tip them over. The process would then repeat itself, and only the actuaries would be happy. They now keep themselves busy by putting the pension funds into long-dated government stock for a minuscule yield, which can be set against long-dated promises. If this stock justifies its entry in my Bad Investment Guide, the funds can always buy some more. At this point, their sponsoring companies ask themselves whether they want to be in the pension business at all, and then join the rush to the exit.
By now British Buttonhooks’ dimmest director can see that the buttonhook business is tricky enough, without getting hooked up in a different business with risks of its own and no matching rewards.