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Risks and opportunities

Old age questions

It’s hard to open a newspaper at the moment without a big splash on pensions
featuring inside. Last week saw A-day, the introduction of the new pensions’
regime for the start of the 2006-07 financial year aimed at simplifying pensions
and making them more attractive to invest in. The jury’s still out on that.

At the same time there is the constant political wrangling over the Turner
report, in particular the questions of means tested benefits and the scrapping
of pensions credits.

Recently, however, some good news emerged when FTSE 100 companies’ deficits
halved in just two months following a stock market surge.

Despite the remedial measures proposed it hasn’t stopped the fear factor over
a potential pension shortfall hitting the profession.

Asked about their feelings on the prospects of their pensions compared to 12
months ago, two-fifths of respondents to our survey said they were more
concerned than in the previous year.

Only one in ten respondents to this year’s salary survey felt more assured
over their pension than in 2005. It was those that are getting closer to
retirement age, and are perhaps not seeing the level of funds in their pension
pots that they would like, that are the most worried. Over half of those polled
aged between 46 and 55 were increasingly nervous, while a large number beyond
that age were also fearful.

Interestingly, it was those in the most senior positions in the profession,
and most likely to have a secure pension, that were really feeling the pressure.
Finance directors and partners in the survey showed more alarm over the state of
their retirement funds than almost all of those in lower status roles.

Their concern could lie in the fact that they are more aware of the situation
than those in different positions or that larger funds mean there is more to
lose.

There was also more general concern over the state of pensions, with three q
uarters of those questioned expressing alarm over the potential impact of a
pensions shortfall on the UK economy.

Saving grace

Given the level of alarm, and the financial nature of their roles, it is
reassuring to see that most of those surveyed place a good degree of importance
on long-term savings. Of those asked, 65% said such savings were very important
and 29% said slightly important. Only 3% saw no value in it at all.

It was in London and Edinburgh that the highest value was placed on putting
some money away, while cities in the north and Midlands seemed to worry less.
Leeds, Manchester and Birmingham all had proportionately high numbers with
little care for long-term savings. But even in these areas, the numbers did not
rise above 10%.

Current government proposals have not gone down well within the profession.

Over two-thirds reject plans to extend the statutory retirement age to 68.
Feeling was strongest on the subject in Glasgow, with just 8% welcoming the
move. But in Bournemouth, a town with a reputation for its elderly population,
people were the most willing to put in a few extra years of work.

With this in mind it is perhaps unsurprising that 57% would not work any
longer than 65 to help ensure a bigger pension. Of those that would, a period of
between one and three years was the most acceptable.

Asked what would encourage greater levels of savings, improved tax incentives
came out as the most preferable option, with 45% wanting to see the government
provide a solution. A significant 33% of respondents felt that greater
contributions from employers would stimulate more saving.

Age seems to play a significant factor in forming this viewpoint. Of those
under 25 just 7% cited tax incentives as the answer, compared to 52% wanting
more help from employers. As we move up the age scale these figures switch
completely, with tax incentives becoming much more preferable.

The youngest members of the profession were also those that said they would
have to be forced to save in the largest numbers and were on par with the oldest
surveyed in thinking they already save enough. Of course, this may simply be a
case of the folly of youth, with the true realisation of what they will need to
save yet to dawn on them.

When asked whether they would sacrifice a company pension for greater holiday
entitlement, age again swings the vote. Overall 21% would take this option, but
among the under 25s the figure is an astounding 59%. People in their late 40s
and 50s are far more pragmatic on the subject, with the percentage choosing
holidays over pensions in the low teens.

Women would be more likely to take extra leave than men, according to the
survey, while those working in tax are the most set against it, with 90%
disagreeing with such a move.

Economic factor

If there is anyone who watches the economy closely it is the readers of
Accountancy Age, who naturally have a vested interest in Gordon Brown’s
stewardship of the country’s finances.

Their attention to the detail of economic policy has lead them to develop
some strident opinions on what is and isn’t working, and what they want to do
about it.

We asked readers about their confidence in the health of UK plc and found as
much pessimism among UK accountants as there was trust that things were going
well. Among finance directors almost one in three (29%) were not very confident.
The gloomy outlook was shared by financial controllers (29%) but was much deeper
among partners in firms where 41% said the future did not look bright.

In terms of age groups, it was older readers over 56, who most felt the
economy looked bleak with 57% logging a lack of confidence. It was younger
members who registered the greatest optimism with 36% of those between 25 and 35
revealing they were ‘quite’ confident.

Readers in Scotland seemed to be the most optimistic with 42% of respondents
in Glasgow and Edinburgh registering a belief in good times ahead. The most
confident accountants were those in the West End of London with 49% saying the
future looked bright. The least confident readers seemed to be in the south,
Portsmouth in fact, where 46% said their confidence was lacking. Birmingham too
seemed a pessimism black spot. When asked if they were ‘very unconfident’ about
the economy, 10% said they were – a larger proportion than for any other area.

Few people were ‘very’ confident about the country’s economic prospects – but
of those that did, most lived in Manchester, although it was a very modest
proportion, at 8%.

Foreign affairs

Despite the general ambivalence about the economy, accountants seem to have
little wanderlust, with few wanting to leave the UK’s shores for work elsewhere.

Indeed, while the UK is importing increasing numbers of accountants,
Accountancy Age readers are largely happy with their location. Of those
who answered the survey, 73% of finance directors, 61% of financial controllers
and 88% of partners said they had no aspirations to work abroad. Overseas work
seemed most popular for those who described themselves only as accountants and
auditors where 45% and 46% respectively were ready to book their flights.

Regionally, it was accountants in Leicester who were most determined to stay
in the UK with an emphatic 79% saying they would not leave home for a more
exotic working environment. Bournemouth, too, apparently has its attractions as
just 15% of accountants there have overseas ambitions. But once again, the most
adventurous accountants were in the West End of London, with 68% ready to pack
their bags.

As you might expect, working abroad was popular with younger members of the
profession. Of those under 25 and between 25 and 35, 62% and 54% were eager to
take to the road. Some 86% of those over 56 were happy to stick with the UK.

Most people were unwilling to take a pay cut in order to start their overseas
working adventure, except among credit controllers where a staggering 83% said
they could live with a lower income as part of moving to foreign climes.

The reasons for an overseas move vary. Of the financial controllers keen to
get away, 66% said it was for the opportunity to travel. That said, 21% of
finance directors believed more money could be earned by seeking out a foreign
posting. Most woman (67%) placed travel as their main reason for a new job
overseas, while more men than woman thought it would benefit their careers.

Of the destinations available for work, our readers plumbed equally for
Australia and the US, both of which got the votes of 25%. Europe had the backing
of 23% while just 2% thought the world’s fastest growing economy, China, was the
place to work.

Of those willing to go to China, it was most popular with those in the 25 to
35 age group, and with more women than men.

A YEAR OF UNCERTAINTY

Finance professionals are certain only that they face a year of uncertainty,
according to the survey of more than 1200 professionals. It reflects the fears
created by the modest growth prospects in the chancellor’s March Budget.

There is less movement in the jobs’ market. People who are looking for a new
job are doing so because they are frustrated by the lack of prospects for
internal promotion. Promotion and career development are bigger factors in
encouraging accountants to find a new job than simply getting paid more money.
But salary increases also look unlikely with 43% predicting increases only in
line with inflation as opposed to increases of more than five or more than 10%.
And after all, you should know ­ you’re in charge of the budgets!

The uncertainty of career direction has an impact on personal finances. About
two thirds of respondents are planning to use the financial year 2006/07 to pay
off debts, save more and cut back on spending. A significant 84% of you said
that long term savings is important to you ­ a sign that the pensions’ debate
has been making an impact on perceptions and only 18% think you save enough.

But there is still little appetite to work longer to secure a more
comfortable retirement, despite this looking more and more likely to be
legislated for.

The results set out the challenges for employers. The biggest issue facing
companies is improving productivity within the workplace ­ a key test for
success in 2006/07. But there were mixed views about whether increasing skills
was important to your company with many people thinking that their employer put
little emphasis on training staff.

Perhaps that contributes to the feeling of 55% who are seeking a job for
‘better career development potential’. The lack of prospect for internal
promotion appears to be encouraging staff to look for new jobs; the average
respondent has worked for four organisations already.

However uncertain we are about the future, finance professionals are working
to minimise the personal risk by advancing their careers and looking for better
jobs, whilst saving for a rainy day.

Dave Jones is UK managing director of Robert Half Finance &
Accounting

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