Thursday, November 12, 2009

ICAEW Axes Defined Benefit Pension Scheme

In June 2006 I wrote:

"Given the ever increasing pension black hole in the ICAEW accounts (it has grown by £4M over the last year), it is hardly surprising that the ICAEW has asked to raise subscriptions this year by 4% (which, despite their denials, is above inflation).

The triannual actuarial review will be carried out later this year and, as sure as eggs are eggs, we can assume that the black hole will have increased.

The astute amongst you will realise that the ICAEW will therefore be again coming cap in hand to its members, to ask for another inflation busting subscription increase in 2008.

Given these never ending increases in staff costs, why did the ICAEW hire 125 more people in 2006?

Do they regard the membership as a docile compliant cash cow which can be milked to death?

The ICAEW have finally realised that the current arrangement, whereby subscriptions are increased each year to fund the pension black hole, is unsustainable. Therefore the ICAEW is going to cancel the final salary (defined benefit) pension scheme (closed to new members since 2000) next year.

Accountancy Age quote an ICAEW spokesman:

"A spokesperson for the ICAEW said that the fund had become too costly in its current form and that the volatility of the market made it difficult to determine the amount of funding needed.

We will honour the commitments we have already made to those people in the scheme, and are committed to funding the deficit that exists

The scheme currently has a £19M deficit.

I don't fully understand "we will honour the commitments we have already made to those people in the scheme".

Given that the scheme has been closed to new members since 2000, the closure implies that those currently in the scheme will have to move to a defined contribution scheme.

On the assumption that is the case, how can the ICAEW "honour commitments to those already in the scheme"?

Wednesday, November 04, 2009

Tax Matters - Michael Izza

Michael Izza is interviewed by AccountingWEB:

"Q: In the ICAEW's Enterprise survey, 54% of respondents said UK regulatory and tax environment was 'not very' or 'not at all' business friendly. Employment tax and legislation and business tax changes were all regarded a hindrance. Why do you think businesses responded so negatively and what do you think can be done to improve the situation?

A: This is a constant refrain, and we hear this from businesses of all sizes. We have a great opportunity this year because we're moving into the last few months of this government, there has to be an election no later than June 2010 and this is now the time when business people of all sizes can start to talk to their MPs (or prospective MPs) about the things that bother them and the legislative changes they would like to see.

The institute has issued a manifesto and that was something we were talking to politicians about at the three main party conferences in September and October. One of the themes in it is that we need a more simplified government in this country. An area which I'm sure many of your members will be familiar with is the tax code. The tax code in this country now runs to over 11,200 pages.

There is nobody in HMRC who understands that from A-Z. There is no chartered accountant in this country who understands it from A – Z, it's just become too complicated. We have an opportunity to make something like that more simple, for everyone in business. This is the sort of thing we should be talking to the politicians about now and saying we want to see it changed.

We're at one of those moments in history where because of the economic crisis that we've just experienced and the fact that things are going to be very different going forward, we might be able to make a very significant change in something like that; and that's the sort of thing the institute is going to be asking for"

I fully agree wrt simplification. However, this is something that the ICAEW should have been calling for way back, not "going to be asking for"!