FINANCE


Pension risk for rising ranks of self-employed


The East Midlands’ growing army of self-employed workers need to pay heed to their National Insurance (NI) records to avoid a pension time bomb, according to Leicester-based chartered accountants Mark J Rees. Just four years ago the


number of self-employed people in Derbyshire, Nottinghamshire and Leicestershire was 170,000 but by last year it was more than 200,000. Almost one-in-ten working-


age people in the East Midlands is now self-employed, however the lack of holiday and sick pay is not the only downside to self-employment, Mark J Rees warns. David King, of MJR Wealth Management, said: “Whether you qualify for a state pension and how much you will get are determined by your NI record. It’s easy for an employee with a regular income to know their NI record is building up nicely. But for the self-employed it’s not so clear-cut. “And with more and more


people in the East Midlands joining the ranks of the self- employed, it’s an issue worth their while to explore. “To get any state pension,


you need to accrue a minimum of ten qualifying years. Reach this and you'll be paid 10/35ths of the full £159.55 per week state pension, or about £45. If not, you won't get a penny. “To get the full pension you’ll


need to have accrued 35 qualifying years. Each additional qualifying year ups the pension by £237 per year.” For the self-employed, a


qualifying year is one during which they have continuously paid Class 2 NI. David added: “Self-


employed people need to know if they have a problem. They should request a state pension statement and/or a NI statement. These will highlight any gaps in their NI record and to what extent their state pension suffers as a result. “If there are gaps, a solution


can be to make voluntary NI contributions. It can cost just £145 to fill a gap year, which seems a reasonable figure when the annual increase in state pension as a result will be £237.”


52 business network June 2017


Business output takes a plunge - but optimism remains


UK business output has fallen to a four-year low, according to the latest Business Trends Report by accountants and business advisers BDO.


The new report reveals that BDO’s Output Index – which indicates how businesses expect their order books to develop over the next three months – had fallen to 95.6 in April from 95.9 in March, the lowest level in four years. It is now well below the long-term growth trend of 100 and is only just above the point of contraction, below 95.0. The slowing services sector, which makes up the


majority of the UK economy, is primarily responsible for the gloomy output figures. BDO’s Output Index for the services sector has fallen to 95.3 from 95.7 the previous month. In April last year, the Services


Output Index was sitting at 100.4, which is above the long-term growth trend. While the sector’s growth was shrinking before the vote to leave the European Union, its waning performance has been more pronounced since the Brexit decision. Consumer-focused services – such as retail – have been the hardest hit by the recent squeeze on household disposable incomes. The Manufacturing Output Index fell marginally from


97.2 to 97.1 in April but is well above the 2016 average of 95.2. The sector has been buoyed in the past few months by the post-EU referendum fall in the value of sterling, making products more price-competitive, and also the pick-up in the global economy. Despite slow growth in output, UK businesses


continue to be optimistic about the future. BDO’s Optimism Index – which indicates how firms expect their order books to develop in the coming six months – had risen to 102.5 from 102.2 in March. This is likely due to the slight strengthening of the pound following the announcement of the general election and a steadying of the growth in inflation.


‘There appears to be growing disconnect between what businesses are experiencing now and how they expect their order books to develop in the coming six months’


BDO’s Inflation Index fell from 105.2 to 104.7 in April. The optimism of UK manufacturers is especially high following the growth of the sector in Q1 2017. BDO’s Manufacturing Optimism Index rose from 110.6 in March to 112.2 in April and is now at its highest since January 2015. This is well above the long-term growth rate and indicates that manufacturers are expecting significant growth in Q1 2017 despite the sector contracting only six months ago. Richard Rose, Midlands Tax


Partner at BDO, said: “There appears to be growing disconnect between what businesses are experiencing now and how they expect their order books to develop in the coming six months. Current output levels are very close to a zero-growth level, yet UK business people are strongly optimistic. This would suggest that we could be in line for a significant growth surge in early 2018.


“We haven’t seen anything quite like this since 2009.


Then, UK businesses were so used to continuous economic growth that they couldn’t quite believe it when the good times didn’t immediately return. Something similar seems to be happening at the moment. UK businesses seem to be excited and upbeat about a post-Brexit ‘global Britain’. This is despite their current experience of very subdued economic conditions. “Optimism is often a good precursor for growth, as


confident hiring and investment decisions are the key determinants of economic success. Nevertheless, realism suggests that current optimism levels are probably pretty fragile. The Government should not be afraid to do whatever it can to support growth if and when it is required.”


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