Out of the UK’s 17 million strong workforce, nearly half of them haven’t even reviewed their pension plans, according to new data released recently by asset manager Barings. Contractor accountants might want to consider whether their clients fall into this bracket!

ISM Research conducted the poll on Barings’ behalf and found that 48 per cent of those interviewed had never reviewed their pension plan. 21 per cent of respondents admitted to reviewing their plan sometime in the previous year.

The survey, gathered information from 1,478 workers, weighing the answers by population, found that a full one third of the people who answered that they had indeed reviewed their pension plan couldn’t recall if they had chosen the default contribution option or not contributions.

Nearly 20 per cent of respondents that had no knowledge of where their pension funds were invested were either at the age of 55 or older.

Barings conducted similar research last year, and in a comparison of the findings, more UK workers are making their own investment decisions than in 2009, but there was also a 43 per cent increase in the amount of people neglecting to review their plans as well.

Marino Valensise, chief investment officer for Barings, stated that it was concerning to see so many people, including limited company contractors, have either a reduced interest – or no interest at all – in planning financially for their elder years.

Mr Valensise also commented on the responsibilities of the investment industry, calling for an improvement to the methods in which pension advice is given in order to ensure people have a more through understanding of risk levels and the kind of return they can expect from their investments.

In related news, the Fair Investment Company’s head of investment and pension research, George Ladds, recently recommended younger members of Britain’s workforce should consider retirement planning that includes investing in ISAs by contributing at least £50 on a monthly basis from age 30 and afterwards.

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The FSB thinks that micro firms should not need to comply with the government’s new pension scheme that comes into effect in 2012.

Under the new plans, all businesses need to enrol their employees in a pension scheme automatically but this would cause an undue burden on firms with 10 staff members or less, according to the Federation.

The FSB also believes that the government set up pension schemes do not meet the requirements of SMEs and that the time and money spent on their administration would be damaging.

Mike Cherry from the FSB said that whilst they welcomed plans that encourage people to save for the future, the new automatic payroll pension scheme will cause administrative headaches for smaller businesses.

To back up their comments, the FSB conducted research that revealed that 70% of business owners are not confident about selecting a pension plan for their employees due to its complexity. To solve this problem, the FSB suggests that a default scheme is set up and anyone who is currently not in a pension scheme should be enrolled.

The REC, on the other hand, is concerned about the auto-enrolment issues for recruitment agencies using temporary workers. The Confederation would like there to be a six month qualifying period before a worker is enrolled into a pension scheme. They point out that the bureaucracy involved in setting up a new scheme for a worker who is only temping for a few weeks will not be off-set by savings benefits.

The REC intends to work with the coalition to make sure the pension reforms will work for everybody concerned.

In addition to the qualifying period, the REC is calling for an option that allows workers to opt out of the scheme before enrolment and the maintenance of the National Employment Savings Trust which all employers can access.

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Concerns have been raised over changes to pension tax relief from next year. Under government proposals, high earners will face increased restrictions on this type of relief from 6 April 2011.

Contractor accountants frequently cite pensions as extremely tax efficient, so any changes will be a huge blow.

The first warning of the changes were signalled in the joint Treasury and HM Revenue & Customs document entitled ‘Implementing the restriction of tax relief’. This was released in December 2009 and the consultation period ended in March this year. At the budget it was confirmed that proposals would enter legislation as proposed.

Under the new rules, anyone with income between £150,000 and £180,000 will see the tax relief on their pension contributions tapered from 50% to 20%. If an employer makes contributions these will also be affected, as a special tax recovery charge will be made and will be imposed on the individual.

Professional bodies that have raised concerns over the plans include the Chartered Institute of Taxation (CIOT). They are concerned that the proposals are disproportionate and will cause a huge administrative burden to employers, accountants and the pension industry as a whole. The CIOT have pointed out that even government estimates have stated that the cost of compliance to businesses will be around £1 billion in the first year of the new rules alone.

With the plans being described as unworkable in practice, an alternative solution put forward is to limit the total amount that can saved into a pension each year by high earners.

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Do you turn to your contractor accountant for business advice? If the answer is yes, you are not alone.

Sage, the business management software provider, recently conducted a survey that showed that 38% of SMEs look first to their accountant for business advice. This is an increase of 5% since the previous study was conducted.

Previously, quite a lot of SMEs sought advice from management consultants, lawyers and banks but in the past 2 years those figures have dropped dramatically. For example, 24% of SMEs contacted their bank for business advice in 2008. This figure has now dropped to just 4%.

And contractor accountants aren’t just seeing an increase in requests for business advice. A survey carried out by the Personal Accounts Delivery Authority showed that 67% of small businesses with between 2 and 49 staff members will turn to accountants for advice on pensions ahead of the reforms due to come into force in 2012.

The 2012 workplace pension reforms will be the first time that many small firms have been under an obligation to provide pensions for their employees and make pension contributions.
These results have obviously delighted accountants and 62% of them now expect their business to expand over the coming 3 years.

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