20/02/15It’s not going away!
Hello Blog readers!
I know, I haven’t been seen for a while. The truth is, that I’ve been roped into walking Hadrians Wall for Great Ormond Street Hospital and what with training, fundraising & the day job…well I just run out of time!
So what, am I on about? Auto Enrolment that’s what. Yes, the Labour party driven scheme to get all those earning more than £10,500 per annum, over the age of 23 and under State pension age, into a pension scheme.
I am just amazed (and I guess I shouldn’t be, but I am) at the ‘laissez-faire’ attitude of business owners, perceivingly willing, to take on The Pension Regulator (TPR) in a game of ‘dare.’ In other words, thinking TPR will not take the action they have the legal powers to enforce and if there are enough likeminded businesses, that a Class Action of sorts could break out.
I completely get why a business owner would not Parley with Auto Enrolment (AE). It is time consuming and creates additional expense, when businesses are yet to feel the comfort and joy of being out of recession. It is the last thing any business owner wants, especially when you are looking at 3% of salary roll and the individuals having to cough up 5%, when they probably haven’t had a pay rise in years.
On the flip side of that, is the seismic shift of how long we live for and what we do for a living. Going back 30yrs, my parents would talk about ‘ three score and ten’ being the average (that’s 70 years) and any more is a bonus. Based on an Internet search I did today, average life expectancy is 81.2 years, male and female combined. With 1m business owners yet to stage for auto enrolment, we are seeing more and more people leave employment and become self employed or owner directors. For those setting up a Limited Company, an accountant is likely to recommend paying yourself a salary below National insurance levels, with the remainder being topped up by dividends. As a self employed person, your national insurance contribution is a flat rate of £2.75 a week plus 9% of profit over £7.9k. So what am I getting at? We are living longer and our state pension is effectively being reduced, when compared to the percentage of national earnings it set out to be worth (around 25%) due to our changing work patterns of owning our own business. By design, due to our own work and lifestyle changes, coupled with living longer and having more babies survive at birth, we need to take more responsibility for our financial future and this is clearly something we are not used to doing.
Our generation (40-60 yr olds) will probably be the first to experience no set retirement age. Retirement as such, maybe a shift change in work patterns, rather than a work full stop, as it is unlikely we will have enough money set aside to stop work altogether.
So rather than ‘having’ to work, wouldn’t it be better to ‘want’ to work? It might need more financial sacrifice now, but it could mean financial enjoyment later on as well, for you and more importantly, for the next generation.
As an Independent Financial Adviser, I’m always happy to talk to business owners and if your business or home is within 50 miles of Huntingdon, Cambridgeshire then my first meeting is free and without obligation. Please have a look at my website: www.business-ifa.co.uk and I look forward to seeing you.
Victor
