Today, state retirement payouts will barely make 25 per cent for a small minority, and this will tumble over the next 30 years.So, we need to reform the system. But privatisation?Peter Lilley, the Social Security Minister, paints a sunny picture 50 years hence, when today’s teenagers can retire on pensions worth pounds 175 a week. Most of this will be paid for by minor but continuing improvements in economic growth over the same period.What happens if that economic growth is not forthcoming and we face a repeat of the recessions in the 1970s and 1980s? Could any government guarantee it can pay pounds 9 a week into young people’s personal pensions? And what if investment performance does not match expectations: who funds the guaranteed minimum pension? Actually, we will. In fact, we will be paying up to pounds 7bn a year extra until the hoped-for benefits kick in in 2040.So, what is the answer? Ultimately, I believe there is no alternative but to accept that one of our society’s obligations is to pay its elderly population enough for them not to live in penury Such an obligation may mean higher taxes for some people. But it is better than relying on market vagaries.Young people need a vision of a decent society they can contribute to. Knowing they will be cared for when they are old is part of that vision..

I suppose we should not be too surprised that the largest company quoted on the London Stock Exchange in terms of market capitalisation is now a bank. HSBC assumed top spot this year as the shares ploughed ahead reflecting sharply higher profits – helped by a strong performance from its Midland Bank subsidiary. Of course, there are those who point to the fact that HSBC is not really a British bank at all It is The Bank in Hong Kong. But it is probably the truest global player in the financial community that can claim to be a British company. It is remarkable how the banking sector has assumed such a significant presence in stock market terms. Already the value of bank shares quoted in London accounts for more than 10 per cent of the value of all shares listed. Soon this will increase still further, with the demutualisation of Halifax, Woolwich, Alliance & Leicester and Northern Rock.
The result season just ended suggests the banks are having a pretty good time of it.

Cynics, particularly those with long memories, will be concerned that the cyclical nature of these businesses has not ended. This may turn out to be to be less important.First of all there are the technological developments within banks. Staff are vanishing fast in this industry.Then there is the broadening of the range of financial services offered by banks. This lessens the dependence upon the strength of the economy and the level of interest rates in terms of determining profits. While retailers in particular look like getting in on the banking act, they are still obliged to buy in a lot of expertise from established players.Is it too late to fill your boots with bank shares? Well, at 10 per cent plus of the market, no self-respecting portfolio should be without one. The introduction of all these new players may even push shares still higher.Simon Knott, our own banking guru on the investment management side, fancies Abbey National and Bank of Scotland.