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Plan now to protect the future
September 7, 2022
With the Bank of England’s recession warning adding further economic tremors to a landscape already shaken by the cost of living crisis, it is more important than ever for companies to plan robustly. Here, Trevor Clark, Chartered financial planner and director at Perspective (North East) Ltd, sets out a map for businesses to steer through the fluctuating environment.
As the final throes of summer give way to autumn’s inescapable pull, the environment is taking on a fresh feel.
Lush greens are turning yellow and brown and radiant blooms draining of colour as Mother Nature readies herself for the harsher months ahead.
It’s the same across the business landscape.
With global political tensions – led chiefly by Russia’s invasion of Ukraine – compounding domestic economic depression and the uncertainty caused by the search for a new Prime Minister, companies too must prepare accordingly to weather the stormy scene.
Financial planning for owners and directors is a constant challenge, but even more so in a world of such distinct highs and lows.
And there are a number of aspects to consider, from unexpected illness and death to corporate tax planning, workplace pensions and employee incentives.
Shareholder/partnership protection
If a shareholder in a private limited company were to die, it is crucial to know if remaining shareholders would be able to buy their part of the business.
If not, there would be significant future implications.
Would you want your next business partner to be your current business partner’s widow/widower, or their children, following their death?
By taking out shareholder protection, the remaining partners or directors can retain control.
Furthermore, if a business owner has died, or been diagnosed with a terminal or critical illness, shareholder protection would provide a lump sum to the remaining shareholders or business owners, which could be used to help buy their stake.
And this is important, because if a company doesn’t have shareholder protection and the business owner were to die, their share would pass to their family.
This, in turn, could cause several problems; not only would the remaining owners have less control on the running of the business, but a family member could sell their bequeathed share to a competitor.
Key person insurance
This is taken out by a business to compensate for monetary losses resulting from the death or incapacity of an important member of its team.
Most companies have a key person, who is responsible for most of the profits, or someone who has a skill that would be difficult to replace. Examples include managing directors and IT specialists.
When deciding on the sum to be insured, it is worth considering potential loss of profits, the cost of replacement and any costs that would need covering without the key person.
The loss to the business could be diminished reputation, a decline in sales from the loss of a sales manager and the costs of hiring and training a replacement.
Although it is written on the life of a key business person, the policy is owned by the business.
This can be a complex area where good quality legal advice is required to ensure cross-option agreements are correctly handled.
Recruitment and retention
A suite of good employee benefits is essential for many employers fighting to attract and retain the right calibre of employees.
We help employers consider the potential benefits of offering employees access to a wider range of benefits and/or greater choice.
We have significant experience of flexible remuneration packages and can advise on the tax treatment of additional benefits, both from an employer and employee perspective.
Group schemes, such as death in service and income protection, are becoming the norm, rather than nice-to-haves.
Death in service schemes provide a cash lump sum in the event of the death of an employee, and can be a lifeline for workers’ dependants to help them manage financially if the worst happens.
Income protection provides an income (usually up to state pension age) if the employee cannot work due to a long-term illness or injury.
Not only does group income protection benefit the employee, but it also helps organisations manage sickness and rehabilitation costs, which enables staff members to return to work, thus reducing absence and therefore impact on the business.
For employers new to these types of benefits, we source and implement them to maximise employee engagement to show how they are valued.
For seasoned employers who are already advocates, we review and restructure group protection policies, and source the best terms available from the whole market to deliver the best possible value for money.
Healthcare schemes were once the preserve of larger companies, however, competitive terms are available for smaller groups of people and sometimes individuals through tailored group arrangements, which we can advise on.
Workplace pensions – group pension schemes
We provide advice to all employers on all workplace pension and group personal pension schemes.
Our strength is our ability to explain complicated issues in a clear and comprehensible way.
We help with:
• Setting up and running new schemes
• Governance advice, including auto-enrolment compliance
• Administration support
• Reviews of existing schemes
• Management charge reductions
• Service improvements
• Gaining wider access to funds
• Organising pension surgeries for all employees
Financial planning is demanding, but we’re here to help businesses navigate the ups and downs and get through the headwinds.
It’s fundamental to our core purpose.
We provide expert, specialised financial planning and wealth management advice that enables clients to make full and effective use of financial resources, so they can plan for – and achieve – the future they desire.