Baby boomers (for the uninitiated, those born around the end of second world
war) have proved to be an energetic and capable generation. It must always be
remembered that, in the mid-to-late 1940s and the early 1950s, this country was
very poor – having suffered the cost of the war. Not only that, but parents were
not particularly well off. Even if they had money there wasn’t an awful lot to
The new generation hit the floor running. The opportunity for a year out to
trek around Thailand just didn’t exist.
The urgent need was to get out there, get a job and earn some money.
Young trainee accountants were no different. Training contracts weren’t that
easy to obtain, and it was not uncommon for the parents of the aspiring
accountant to have to pay towards the cost of the employment or
training programme. Certainly pay was low, if it was received.
Nevertheless, this period gave birth to the generation of movers and shakers.
If living at home they made contributions to the household budget as a matter
of normality. Many married young, moved out, bought houses and got on with life.
The previous generation of accountants in practice were quite small in number.
The new generation training with the practice, therefore, had some competition
in order to acquire a partnership or buy into a practice, or even buy some fees
and even further, start their own practice.
The sprint had begun as partnerships were purchased for real money. Major
loans undertaken on the absolute understanding that they would, of course, get
their money back without any trouble once the end of their career was reached,
the same as it had been for the previous generation, perhaps even better.
Truthfully, they did well and all was fine until the late 1980s and early
1990s – when recession hit.
It was at this point that so many accountants in practice (and also, of
course, in other industries as well) stopped making pension payments. Survival
was the order of the day, and money being put aside for the future was less
important than food on the table today.
As a consequence, the value of accountants investing in private pension plans
went down considerably. In addition there were two other major issues. Not only
did the practice have to survive with fee pressure and some clients not being
able to pay at all, but there was the issue of ageing parents to be cared for,
and secondly the baby boomers own children coming through and going on to
universities and colleges.
It must be remembered that the baby boomer generation had university fees
paid for. The new generation coming through was going to have to pay. And where
was that money going to come from largely? The bank of mum and dad.
Once the recession had receded, the country boomed again. Accountants
relaxed. Business was good. Money started to be invested back into the future.
Investment properties, pension investments. All looked rosy again.
The only very slight problem on the horizon (but only just visible), was the
lack of youngsters in the practice coming through with a big fat cheque book to
buy the partner out. But never mind, something would turn up or the practice
could be sold – the money returned with some cash left over for retirement.
High achievers? Certainly the baby boomer generation has been that. Then the
first hint of real trouble came back to haunt potential retirement.
Pension providers started admitting they couldn’t afford to pay the pensions
they originally promised. A big shock. Particularly as so many accountants had
invested on the basis that it didn’t pay commission.
The other matter which received less anger than expected was Gordon Brown
dipping into everyone’s pension fund for some extra cash. I am half convinced
that, if this had been in France, nooses would have been prepared and, at the
very least, the farmers would have been delivering some of their by-products to
10 Downing Street.
England had built an economy based on spending. Not only based on spending,
but borrowing to spend. House prices escalated out of all proportion to reality,
fuelled by banking greed, the collapse of course was inevitable.
And where did that leave the baby boomers? Having started to reinvest money
into retirement, the value of that retirement fund diminished almost overnight.
Cash became almost worthless in terms of investment. Property prices fell, or
hardened. The return on commercial property almost collapsed, and even
residential property became not so easy to let.
The end result is that, after a lifetime of hard work, the chartered
accountant saw their chances of retirement at somewhere between 50 and 55
The accountant is now an average of around 60, give or take, and still
working. Pensions have been shot to pieces. Cash is not returning decent
interest earnings. Retirement is starting to look a long way off for many.
That generation has worked hard to build businesses, look after ageing
parents and nurture a new generation coming through. And to what end?
Another recession that has hit at exactly the wrong moment. Two events
separated by twenty years, each of them having had their own depleting effect on
the potential retirement of the chartered accountant in practice.
Not only have we reached the point where retirement has been put off over and
over again, but also the value of the investment that has been made in that
practice has come under question.
The traditional route of selling to the next generation of chartered
accountants coming through is currently almost unheard of. Perhaps it will be
back, but who knows? The other option, the sale of the practice, is not always
possible as most chartered accountants are in partnerships, and can’t make a
decision on their own as to what will happen with the practice.
There are often some young partners in the practice who refuse to go along
with the option of being sold onto another practice, and to lose their
opportunity to move forward. In addition, they don’t like the idea of borrowing
money (even if they could) to buy out the potential retiring partners. The
retiring partner also has an issue that the value of the cash generated is
unlikely to keep the practitioner going for the foreseeable future.
High achievers, low receivers? Comments please in a plain brown envelope.
Ron Goldsmith is director of Goldsmiths Practice Services LLP.
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