Britain's premier retailer is set to tell shareholders at an annual meeting on Thursday that tough trading conditions and increased competition have caused a sharp year-on-year fall in sales in the first quarter of the new financial year. Yesterday, M&S announced that it was closing six stores in Germany and France at a cost this year of pounds 17m. City analysts are bracing themselves for a bearish trading statement at the agm - the first shareholders' gathering since the departure of the former chairman and chief executive Sir Richard Greenbury. This would be a shame, but it may be that this "with profits" method of saving is past its sell by date anyway.The with profits, pooled fund method was established in an altogether different age when less than transparent dividing up by trusted managers on a partly discretionary basis of investment gains was thought a perfectly reasonable way of operating. Equitable Life hints darkly that if it does take the full pounds 1.5bn hit, it would be so financially weakened that it may have to demutualise and sell up. By the same token, however, it cannot be right that other policy holders are made to pay for them.

There are no shareholders to pay for this liability, so that to the extent that it is met, it merely reduces the amount of money available to other policy holders. It therefore proposes to cut the final discretionary bonus on such policies, with the effect that all policies get the same, whether or not they are guaranteed.So clear is the management about its right to do this, that if it loses the High Court case, it proposes to find another way of achieving the same outcome, always assuming the judge leaves room for such an approach.It is hard to understand how Equitable Life could ever have entered into these unhedged guarantees. In these circumstances it is very difficult to argue that people's "reasonable expectations" - the ill defined jargon phrase used by life companies in such cases - have not been met.Moreover, Equitable is a mutually owned company. What investors have lost on the swings, they've gained on the roundabouts.The rate of income return may have fallen steeply, but there is a much bigger capital pot to earn it on. There is a reason why rates of return are much lower than they were. The fall in return has for most people been matched by an equally stunning climb in investment performance. When they were written, it seemed improbable to the point of impossibility that rates of return would fall as low as they are today.

But even so, to now turn round and attempt, in effect, to rip up a legally binding guarantee, bought in good faith, seems dishonest, especially from an organisation that prides itself on a whiter than white reputation.Equitable's legal case, now being argued out in the High Court, is a complex and technical one, but the moral defence is relatively simple. Equitable Life, unlike most others caught up in the debacle, has chosen not to meet the liabilities arising from its annuity guarantees. The fact that Equitable did not is doubly indicative of management failure.Part Two - dealing with the consequences. Some life companies which sold these guarantees, notably Scottish Widows, had the foresight to forward hedge any potential liability. As Equitable policy holders are finding out, there are very few things in life that are guaranteed, but one is that the unexpected will always happen. It scarcely needs saying, however, that though the competitors that resist this pressure may lose out in the short term, they seriously win out on a longer term perspective.Managements take on these risks, then, not just because everyone else is doing it, but also because they refuse to think the unthinkable - that what is meant never to happen does indeed take place.