DEPOSITORS may have been bailed out by the Government, but shareholders have not been so lucky. "We'll help you get where you want to be," was Bradford & Bingley's promise to its customers. Where it got them to was "broke" after the Treasury seized the company, rendering worthless nearly a million small shareholders' typical investment of about £1,400 a year ago.
They have now joined the queue behind nearly a million Northern Rock shareholders who are waiting for the Government to put a price on their lost investment, but few are holding their breath for any significant compensation.
But the damage to inve
stors caused by tanking banking share prices goes much further than the collapse of two former building societies which over-reached themselves.
Investments in some of the banks, not least HBOS and Royal Bank of Scotland, fell, at one point, to only a tenth of what they were worth a year ago. Staff who bought shares in their companies, as some were encouraged to do, or regularly converted share-save schemes into company stock, will have been gutted.
It will come as a particularly bitter pill for HBOS staff to swallow, confronting, as they must also do, insecurity about their future employment.
But the pain doesn't stop there. Billions of pounds are invested in banking shares, much of it directly via tracker funds.
Banks form a weighty component of both the FTSE index of 100 companies, and also of the All Share Index. Both were around 27% lower last week compared with a year ago.
While the Government's intervention may have averted a serious crisis, its legacy is likely to cast a shadow over the future prospects for banking shares and therefore all our pensions.
Seven Investment's Justin Urquhart Stewart, below, predicts: "We are returning to the days of Quaker bankers. Banks will be more conservative, people will need big deposits, we may see old-fashioned mortgage queues, and growth will be slower as a result.
"This will have an impact on stock markets. People will have to adjust their plans for retirement. They will either have to work longer or save much more, because returns will be lower."
A big concern is the impact the Government's package will have on dividends, where a quid pro quo has been suggested of no payments to shareholders while taxpayers are footing the bills.
SMV's Colin McLean says: "People have held bank shares into retirement for the regular dividend, and so you will see investors asking themselves why they are holding them any more, and some will sell."
Last week's extreme gyrations of the stock market will raise serious questions for many over the viability of the current private sector system of saving for a pension.
Indeed, plans to force all employees to save for a pension looked seriously holed below the waterline as the Pensions Bill continued its passage through the House of Commons, as share prices lurched to new depths.
Many pensioner groups have long campaigned for a larger state pension as the building block of retirement provision, with funded pensions providing a top-up for the better off who can afford to and who choose to save in that way.
But Punter Southall actuary Andy Scott said the flaw in this proposal was that it relied on future generations. "We can agree to pay ourselves as big a state pension as we like, but these are unfunded pensions. There is no pot of money. They will be paid by future taxpayers, who could turn round and refuse to pay them."
This is a hard lesson which Hargreaves Lansdown investment guru Mark Dampier believes is heading in the direction of many public sector workers.
He said: "The cost of these is going to be over a trillion pounds. At some stage a politician, and it doesn't matter which party, is going to have to stand up and say, 'I'm sorry but we can't do this. We can't afford it. You can have half.'"
If markets do grow more slowly over the next few years as the economy heads into a hard freeze, of always winter but never Christmas, then those saving via money purchase schemes will have to prepare themselves for smaller pensions than they expected.
According to Morning Star, £1,000 invested in a FTSE 100 tracker a year ago is now worth £760, with the same investment in the All Share dropping to £750.
Although the picture improves if you cast your eye back to better times (doubling over 10 years and growing to £1,300 over five), last week's white-knuckle ride may be a thrill too far for some employers.
The expectation is that the number closing final salary schemes will grow. Some beleaguered funds may be so severely hit they collapse under the strain. Four more schemes, and more than 3,000 employees, sought the protection of the Pensions Protection safety net last week.
These numbers can only grow as we head into recession. Members of final salary schemes whose employer collapses, abandoning the scheme to the PPF, will also be worse off in retirement because it does not protect all their savings.
If the rate of scheme collapses truly accelerates, the safety net itself could buckle. There is no guarantee it will pay out at all.
