A growing number of business owners are using pension-led funding (PLF) to expand their businesses. PLF is one of the newest forms of alternative finance available to companies that either cannot or do not want to access traditional bank funding.
The CBI described PLF as: “A key form of alternative finance for growing businesses.”
PLF allows business owners to make use of liquid funds held within a UK Registered Pension Scheme to finance their business in such a way that there are no undesirable tax charges.
It is a business financing mechanism and not a method of putting pension funds into the hands of individuals. PLF must be used to enhance a business and funds cannot be used to provide abnormal rewards or dividends.
PLF is an option available to most businesses, irrespective of size or sector. Any money successfully acquired via PLF can be used within a business to provide:
There are a number of reasons why PLF is providing an attractive form of alternative finance to business owners. They include:
There are very few activities that cannot be funded via PLF, but one of them is residential (ie buy-to-let properties).
Andy Eames, managing director of Lancashire engineering firm Trailerteq, turned to pension-led funding to help him acquire a stake in the company. He liked the idea that he could put his own money to better use rather than leaving it in his pension fund. He used the funds in his Small Self-Administered Scheme (SSAS) to secure his stake in the business.
Andy said: “I liked the idea that I could manage my own funds and thereby gain greater rewards. Rather than borrowing the money I needed from the bank, I was happy to back myself and use my own money to invest in the business.
“As long as you have the right pension vehicle in place, I would encourage other business owners and entrepreneurs to explore whether pension-led funding might be suitable for them in achieving their business objectives.”
Other examples of pension-led funding have included businesses that wanted to increase their workforces and acquire new machinery to take advantage of the improving economy.
In one such instance, a Lancashire textile business sought out finance to provide working capital and improve its workforce by recruiting three specialist members of staff. The banks refused to provide the support the company was seeking to fund its growth, with one of the principal reasons being that the required sum (£55,000) was too small.
Instead, the owner transferred three under-performing funds (totalling £110,000) to a newly created SSAS. Once the funds were received, the SSAS advanced a loan of £55,000 (50% is the maximum amount allowed) to the business. The loan was secured on the value of the company over a five-year term and with five equal annual repayments.
Copyright © Andy Wood 2014. Andy is director of Enterprise Tax Centre.
Are you an employer in the UK? If yes, you need to be prepared for the new law surrounding workplace pensions. Maybe you’ve already heard of auto-enrolment but think it won’t affect you as you only have a couple of employees. Or, as it’s being phased in gradually, you don’t need to worry about it for ages. If you do nothing, though, you may be caught out. The Pensions Regulator will always try and work with businesses to help them become compliant but it will issue enforcement notices that can lead to financial penalties for employers that don’t comply with their duties.
Staging dates (the date auto-enrolment starts) have already started for larger businesses (from 1 April 2014 – 1 April 2015 for businesses with 50 or more employees). Smaller businesses with fewer than 49 employees will need to start auto-enrolment between 1 August 2015 and 1 April 2017. This sounds like a long way off but The Pensions Regulator is advising that it can take at least a year to prepare properly for auto-enrolment. The first step is to check your staging date so you know when you need to start enrolling your staff. You can then use a planner on The Pensions Regulator website to help guide you through the process.
There is lots of information available to businesses about auto-enrolment pensions. You may view it as another unwelcome administrative burden on your business but the best way to lessen the impact is to get ahead of the game and find out what you need to do now.
More information on auto-enrolment:
Until recently, requests for flexible working patterns were only available for parents of children up to the age of 17 (or 18 if the child has a disability) and for carers. But recently, the laws affecting the right to request flexible working hours have changed.
Since 30 June 2014, any employee who has a minimum of 26 weeks of service with the employer now has the statutory right to request flexible working conditions. So what is the impact of this change and who does it affect?
There are various types of flexible working, including working compressed hours (eg working five days’ worth of hours in four days), flexitime, job-sharing, shift work, remote working (eg working from home) and part-time working.
Before the change in legislation on 30 June 2014, this right was only available to parents and certain carers. Now, anyone who has worked for a company for a minimum of 26 weeks is entitled to submit a request for flexible working conditions.
A recent survey conducted by Powwownow found that 70% of respondents are aware of this change in the law. Surprisingly, 46% of those taking part in the survey were not aware of the previous law regarding flexible working hours.
Anyone can make a request for flexible working from their employer, as long as the nature of the business allows for it. Employees are only allowed to make one request within a 12-month period.
The survey found that within the first week following the change in legislation, 8% of respondents taking part in the Powwownow survey had already submitted a request. A further 35% of those taking part in the survey said that they were considering submitting a flexible working request in the future.
Requests for flexible working hours must be made in writing to your employer. Within your request, you should include:
Copyright © 2014 Jacqui Keep of Powwownow, providers of contract-free conference calling services
Pre-nuptial agreements (AKA “pre-nups”) have traditionally been associated with wealthy Hollywood glitterati seeking to secure their assets in case of divorce. However, in recent years, such agreements have become more popular with couples in the UK from all walks of life, who ask solicitors to help draw up a pre-nup. But how effective are they?
Contrary to popular perception, pre-nuptial (and post-nuptial) agreements are not legally binding in England and Wales. Although the Supreme Court decision (in the landmark case of Radmacher v Granatino) strengthened the force of pre-nups and ruled that they should be upheld by the courts as long as they are fair, judges can still order different financial provision in the event of a divorce.
Earlier this year, the Law Commission published a report (Matrimonial Property, Needs and Agreement) that proposed the introduction of “qualifying nuptial agreements”. Whether pre- or post-nuptial, such agreements would qualify for enforcement by the courts. The report came along with a draft “Nuptial Agreements Bill”, which presented the proposals in legislative format.
At around the same time that these Law Commission recommendations were published, a Private Members' Bill (The Divorce [Financial Provisions] Bill) was introduced to the House of Lords. If this bill is approved, it will have the same effect as the “Nuptial Agreements Bill” by enshrining nuptial agreements in law so that courts are obliged to uphold them. And it would limit the length of maintenance payments to three years and share the net value of matrimonial property equally between the parties. At time of writing, the bill has passed the second reading in the House of Lords.
Whether either of these bills will succeed in making law, the enforceability of pre-nups and post-nups looks likely to become less dependent on the discretion of individual judges.
A member of the Law Commission, Professor Elizabeth Cooke, summarised the reasons that making nuptial agreements enforceable under legislation would be preferable to the current situation. She said: “Pre- and post-nuptial agreements are becoming more commonplace, but the courts will not always follow them and lawyers are therefore not able to give clear advice about their effect. Qualifying nuptial agreements would give couples autonomy and control, and make the financial outcome of separation more predictable.”
Copyright © 2014 Muna Saleem, associate solicitor with family law firm Crisp & Co and accredited member of the Law Society’s Family Law Panel.
Anyone who loves or loved a person affected by dementia will know just how cruel, indiscriminate and devastating it is. And the scale of the problem is getting significantly worse, with many commentators describing it as a ticking timebomb.
National charity Dementia UK estimates that 42% of the UK population has a friend or family member with dementia, with more than 820,000 people in our country having dementia and that number expected to rise to one million-plus by 2030. Alzheimer’s Research UK says dementia now costs the UK economy £23bn per year – twice as much as cancer and three-times as much as heart disease.
According to Alzheimer’s Society: “The word dementia describes symptoms that may include memory loss and difficulties with thinking, problem-solving or language. Dementia is caused when the brain is damaged by diseases such as Alzheimer's disease or a series of strokes. Dementia is progressive, which means the symptoms will gradually get worse.”
When launching the Government’s Dementia Challenge in March 2012, Prime Minister David Cameron said: “We’ve got to treat this like the national crisis it is. We need an all-out fight-back. Dementia is a terrible disease and it’s a scandal that we, as a country, haven't kept pace with it.” The Dementia Challenge seeks to significantly improve dementia care and research by 2015, as well as create communities that better understand how to help those with dementia, as well as their families and carers. Businesses large and small have a huge role to play in this.
In early August, Public Health England and Alzheimer’s Society released a new report into the implications of dementia for UK businesses, calling on employers to “adapt their working environments to support the increasing numbers affected by the condition”.
It estimates that by 2030, dementia care obligations will cost UK businesses more than £3bn. If the number of people with dementia rises as predicted to 1.09m, the report says it will have a “huge impact” on businesses because “the number of workers reducing their hours, changing work patterns or even quitting, due to the demands of caring, is expected to grow”.
The number of people forced to leave their jobs to care for a loved one with dementia is expected to increase from 50,000 this year to more than 83,000 by 2030. Yet, says the report, if “companies increased their employment rate of dementia carers by just 2% over the years to 2030, for example, by offering more flexible terms of employment, the retention of these skilled and experienced staff would deliver a saving of £415m”. The cost of skills and experience lost from the workforce because of dementia will rise from some £628m this year to £1.16bn in 2030, experts say.
According to the report, many businesses are already taking action, with 8% attempting to “accommodate” staff members with dementia, and 52.1% considering doing so in the future. Twenty major businesses (eg M&S, Barclays, BT, Argos, Lloyds Banking Group, Lloyds Pharmacy, etc) have already pledged to support staff and customers with dementia.
Not being dementia friendly could harm your sales, especially if you’re a retailer. According to the report: “The spending power of households affected by dementia [will] double to £22.7bn by 2030, from £11bn in 2014”, with 62% of people with dementia wanting shops to have a “greater understanding of the condition”, and 23% having “given up shopping since being diagnosed” because shops don’t sufficiently cater for their needs.
Alzheimer’s Society chief executive Jeremy Hughes says: “Thousands of people affected by dementia are forced to give up work and are denied a lifeline because of the failure of organisations to change the way they do business. From the shop floor to boardrooms, dementia affects every workplace; from people struggling with the early symptoms of memory loss at work, to those juggling a job while caring for a loved one. As the condition touches the lives of more people, businesses must gear up to support all people with dementia – staff and customers alike.”
In light of the potential effects of this significant increase in dementia, family-owned firms must also carefully consider whether their management and succession plans are sufficiently robust. And maybe all of us need to give much more serious consideration to power of attorney, so that someone we trust can make important decisions on our behalf, after dementia has so cruelly robbed us of that option.
• Blog written by Start Up Donut editor and freelance content writer Mark Williams.
Almost all employees in every business now have a right to request flexible hours. You of course have the right to decline, for one of eight allowable reasons. But there are often many business benefits to be had from flexible working.
Initially we introduced flexible working to attract programmers. They are really hard to recruit and we identified it as something that would help us attract the best candidates. We thought it would appeal to their tendency to work late mornings and into the night, and after weighing up the costs, we discovered that with a simple IT system, staff could self-monitor their time.
It proved so successful we decided to extend it to all our technical staff. Our primary motive was to keep our staff happy. Flexible hours allows them to fit work around their lives, which is important, motivationally, when we know that our staff work to live.
Our staff also recognise that it’s a perk they won’t get in many companies. Meaning it’s not only great as a retention tool but it’s a benefit they respect. There is no abuse of the system.
Over three-quarters of eligible staff have taken us up on flexible working. Luckily we have a nice split of staff who prefer to start early and those who prefer to stay late. Interestingly, all opt in to cope with traffic on their commute.
Operationally, it is managed via a clocking-in system, with each employee tracking his or her own time. We also stipulate the scope of the policy in our company handbook, which forms part of their employment contract, so we don’t constantly have to answer questions.
The one condition we make (which we’d recommend) is to ensure staff are present each day for what we term ‘set cover hours’. This means we always have a fully staffed office at key times. Plus it means that our staff don’t work long shifts so they can take a day off each week. That’s unmanageable. Instead, the maximum full day off they can claim is one a month.
Unfortunately, we can’t offer flexible hours to everyone. It’s just not possible given their roles. Our call centre is a prime example. We need the customer service provision staffed when customers want to speak to us. However, as long as you’re able to explain why, all staff understand, accepting it as part of their job.
The only issues that have ever arisen is if staff can’t manage their own time. The worst cases take more than they give, meaning by the end of the week they are in minus hours. The only solution is to suggest they pull in some long shifts or take the time as holiday.
Overall, though, we’ve found flexible working to be a real plus. Staff see it as the perk it should be and it therefore retains as well as helps us recruit, without incurring massive overhead costs. It’s win-win. Just make sure you set clear parameters that can be rolled out, as far as possible, across the board.
Copyright © 2014 Ian Cowley. Ian is managing director of cartridgesave.co.uk, which has benefited since introducing flexible working more than five years ago.