(PRWEB) July 7, 2006
As the pension crisis is developing in UK, alarming proposals are headlining in UK press. The headline causing public outcry has suggested increasing pensionable age to 68. The new proposal has been welcomed by some spectators, but appears harsh in the light of record profits earned by banks in 2005.
The new proposal to introduce a compulsary 3% contribution on employers, including small businesses, made headline news in the FSB June/July newsletter. It appears even more unreasonable when it is publically recognised that some very small businesses may be forced to cut down on staff or even shut their doors. It may increase barriers to entry in many markets, strengthening the competitive position of established businesses and making life harder for new entrepreneurs.
The top rate of corporation tax is still 30% at profits of £1.5m, lower than the top rate of personal income tax at 40% at income of £33,300 per annum.
Employers' National Insurance contributions are slightly higher at 12.8% than 11% contributed by salaried employees, but this rate is charged on the total income of employees, whilst businesses receive a tax deductible expense for their contribution, taking relief from reduced wage increases and corporation tax bills.
Employees are hard hit by the current tax regime, and first time buyers are having a difficult time getting on the property ladder.
In stark comparison, HSBC reported awards for record pre-tax profits of £11.5bn in 2005. The combined pension deficit of FTSE 100 companies was in the region of £37bn in mid 2005, around £0.37bn on average per company. A £0.37bn contribution from HSBC to the pension deficit would hardly be felt.
It is interesting that no new proposals have been raised to increase the rate of tax on 'super-profits' that could directly be applied to reduce the pensions deficit. A top tax rate at profit levels of £1.5m appears absurd in the face of profits of £11.5bn which have been achieved.
They can 'adjust prices, offer lower wage increases and absorb costs through profits', quoting the response from the DWP spokesperson to a statement by Sir Digby that £500m would be needed to help small businesses meet the cost of the proposed compulsary contribution of 3%. Small change for HSBC.
Investing in UK pension plans appears to be on par with the safety net provided by sports betting in the present climate.
The free online audit and accounting service website http://www.easybooks.741.com has published an article in July 2006 to assist individuals with total retirement planning, which can be viewed at http://www.easybooks.741.com/pension.html.
The guide takes a look at the pension market, exploring possible reasons for pension deficit. It proposes solutions to grow capital that individuals can add to occupational pension payouts to reduce pension shortfalls. New guidance on managing debt via refinance has been published at http://www.easybooks.741.com/debtindex.html to supplement guidance on increasing wealth to plan for retirement.
In the light of government attitude that employees in business are responsible for the pension crisis when they do not take part in business profit sharing, it seems the only option is for individuals to take full responsibility for their own pension planning.