At least this time only those who are willing to stump up the cash will have to do so.
The fact that 62,500 investors registered interest in the Lloyds share sale in the first 24 hours shows there is still a huge appetite for shares – even after a summer of volatility.
It also suggests the investing public has an eye for a bargain. The promise of a 5 per cent discount and a bonus of one share for every 10 held is a nice little incentive for the small investor.
The government has hailed this as the biggest privatisation in more than 20 years.
Questions have been raised about whether it is a good deal for investors or the taxpayer.
“The promise of a 5 per cent discount on Lloyds shares and a bonus of one share for every 10 held is a nice little incentive”The share price would apparently have to be above 85.2p before the discount for the taxpayer to make a profit on the privatisation.
A commentator in one left-leaning national newspaper described the sale as “grubby and indefensible”.
He apparently prefers the idea of a continued drip feed sale to the City rather than selling shares to the general public.
On the other hand, Hargreaves Lansdown has suggested that someone investing £1,000 could get £200 back in a year based on the discount, bonus and potential dividend. That is a pretty tasty lure for any investor.
Following the debacle of the Royal Mail share sale, two things have been made clear: small investors will receive priority; the discount will be kept within reasonable bounds.
Of course this is actually a political sale. The government has trotted out the “share-holding democracy” phrase in an attempt to rekindle thoughts of the Thatcher years when the public was offered shares in British Gas, BT, Amersham, BP and power companies.
But if this is to be the case then the new shareholders, who could own £2bn-worth of stock, need to be encouraged to exercise their democratic rights as part-owners of Lloyds.
This means easy access to voting when they are given the opportunity to do so. Sadly that is not always possible for those who hold shares through nominee accounts.
It is an issue which needs addressing if share sales are truly to encourage a shareholding democracy rather than being seen as short-term financial windfalls.
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Protect our pensions
The Association of British Insurers has placed itself firmly alongside those proposing the abolition of higher rate tax relief on pension contributions.
Its proposal for a savers’ bonus is in essence a rebranding of the basic rate tax top-up currently in place.
The suggestion is part of a submission to the government’s consultation on pensions tax reform.
Referring to a £1 top-up for every £2 or £3 paid in is a much simpler way of presenting the benefits of saving into a pension.
Arguably, many people do not bother with pensions simply because they do not understand the complex way in which tax relief is explained and presented.
Not surprisingly the ABI has come down firmly against the idea of turning pensions into another form of Isa.
They foresee a costly, complex and confusing 50-year transition period, all for the sake of some short-term tax gains for the Treasury.
This reflects my own concerns about any such change. If you are going to turn pensions into Isas, then why bother having pensions at all?
Reform of pension tax relief is inevitable. If we can get a £1 top-up for every £2 paid in then this would be an excellent result.
But even the £1 for £3 option would be better than losing upfront tax relief altogether.
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Mixing isn’t fixing
The idea of a trade body mega-merger as proposed over the summer may still go ahead, but it is good to see that the Building Societies Association wants no part of it.
While some of those involved, such as the British Bankers’ Association, the UK Cards Association, Payments UK and the CML, may have many issues in common, others need to retain a distinctive voice.
Paul Broadhead, the BSA’s head of mortgage policy, points out that the “building society sector is truly distinct from the banking sector”. And long may it continue to be so.
Collaborating on certain issues is one thing. Merging with other trade bodies may save money, but I cannot see how it would serve their members’ wider interests.
Tony Hazell writes for the Daily Mail’s Money Mail section
t.hazell@gmail.com
