Changes To The National Minimum Wage

Posted on August 15, 2011 by bill

The Government has made changes to the Low Pay Commission (LPC)’s remit for their 2012 report.

While stating clearly that the Government supports the NMW, it has asked the LPC to focus on certain matters in this year’s review. Given the high level of unemployment among the under 30s, the Government has asked the LPC to review the NMW in light of the position of young people in the labour market. As such, the most likely area for change is in relation to the minimum wage for apprentices and those entitled to the young workers (16 and 17 year olds) or development rate (18, 19 and 20 year olds) of the NMW.

As well as young people, the main concern for the LPC in preparing this year’s report is whether the NMW can be made simpler and more certain. The remit notes that this may involve the removal of elements of the NMW, and it has been suggested that this may mean the abolition of the Agricultural Wages Board. Employers will no doubt welcome any move towards greater certainty as to future levels of NMW, as the new rates are currently only announced a year in advance.

The final LPC report for 2011-12 is not due until the end of February 2012 and we will keep you up to date with any developments. In the meantime, the NMW will rise on 1 October 2011 in line with the 2011 report when the standard rate will increase to £6.08 per hour, the development rate to £4.98 per hour and the young workers rate to £3.68 per hour.

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Bribery Act Now In Effect

Posted on August 8, 2011 by bill

The Bribery Act 2010 came into force on 1 July 2011. Although the Bribery Act is not primarily a piece of employment law legislation, it is important that employers are aware of the implications of the new law.

The most important aspect of the Act for employers is the new corporate bribery offence which is found in section 7 of the Act and provides that “a relevant commercial organisation (“C”) is guilty of an offence under this section if a person (“A”) associated with C bribes another person intending to obtain or retain business for C, or to obtain or retain an advantage in the conduct of business for C.”

This means that where an employee bribes a third party on behalf of their employer (whether on direct instructions or not), the employer may be liable under the Act. The penalties for a Section 7 offence are steep: unlimited fines are possible and the employer could be debarred from contracting with public bodies. In addition there is likely to be significant reputational damage as a result of a bribery investigation.

Employers can also be convicted of the direct offences ofoffering or receiving a bribe, albeit these will be harder for prosecutors to establish and, unlike the offence detailed above, require the company to have deliberate intention.

The key way in which employers can avoid liability under the Act is to show they had in place adequate procedures to avoid bribery. This is not only a defence to the Section 7 offence, but having good procedures in place may even lead the prosecutor to decide not to proceed with a prosecution. This is because the prosecutors must consider whether there is any public interest in bringing proceedings against the organisation.

To implement and maintain such procedures, to produce the correect documentation, we can put you in touch with one of our relevant business network partners. MBB do not receive any commision or rewards for this from our business partners.

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Pension Annuities Explained

Posted on August 2, 2011 by bill

Having saved hard to build up a pension fund, there will come a time when you need to think about turning your savings into a retirement income. The conventional way is to buy an annuity.

Annuities provide an income in exchange for a capital sum. When you swap your pension fund for an annuity you usually buy a compulsory purchase annuity. In this article we take a look at the different annuity options.

How does an annuity work?

Just as life assurance offers protection against the financial consequences of ‘dying too soon’, annuities protect you from running out of capital through ‘living too long’. The income you receive from your annuity depends largely on the size of your pension fund, your age and gender, and the type of annuity you choose. Annuity rates vary in line with movements in interest rates and bond yields.

Single-life or joint-life?

First, you will need to choose either a single-life annuity or a joint-life annuity.

A single-life annuity pays you an income until you die, and then stops. A joint-life annuity pays an income that continues after you die to a surviving partner or dependant.

What Annuities are available?

There are different annuities to suit different needs.

Level Annuity

A level annuity pays the same income each year for the rest of your life. The main drawback is that, as time passes, inflation reduces the buying power of your income.

Increasing Annuity

As the name suggests, an increasing annuity protects your income from rising prices by increasing each year, either by a fixed percentage or in line with prices. At first, an increasing annuity pays a lower income than a level annuity.

Investment-Linked Annuity

Linking your annuity to movements in the stock market, or insurance company investment funds offers you the opportunity of a higher income in the future. However, the reverse is also true and you risk your income reducing if stock markets go down.

With-Profits Annuity

This is similar to an investment-linked annuity except you link your income to an insurance company’s with-profits fund. Your future income depends on the insurance company’s capacity to pay bonuses.

Guarantee Period

You can choose to add a guarantee to your annuity. This means if you die during the period of the guarantee the payments continue to your estate until the end of the guarantee period. Adding a guarantee will reduce the income you receive from your annuity.

Impaired-Life Annuity

When you take out life assurance, poor health may mean it costs more because of the heightened risk of you dying and the policy paying out. This same logic applies to an impaired-life annuity.

An impaired-life annuity pays a higher income if poor health means it is likely the annuity won’t have to pay the income for as long as it would to a healthy person.

As well as impaired-life annuities, there are annuities that pay a higher income to smokers because of their shortened life expectancy.

Open Market Option

Although you may have built up your pension fund with a particular company, this does not mean you have to buy your annuity from them. This is where the open market option is useful as it allows you to take your pension fund to the ‘open market’ and buy your annuity from the company offering the best income.

The government is concerned about the low take up of the open market option and believes too many people just take the first annuity on offer. The government plans to reform the open market option process to ensure everyone has the opportunity to maximise their retirement incomes.

Small Pension Funds

If your total pension funds, including the capital value of any pensions you are already receiving, do not exceed £18,000 in the 2011/12 tax year, you can choose to receive your pension funds as cash. One quarter of the cash sum is tax-free with the balance taxed as income in the year you receive it.

As you can see, you have several annuity options when you retire. However, with this much choice, it is essential that you take independent financial advice so that you make the right decisions. As a bookkeeping organisation we work closely with some good Independent Financial Advisors and Accountants and can arrange reviews with them on your behalf – we receive no financial reward or any form of commission for doing this as we see it as part of our remit to help you and your business.

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