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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Blog

The Changing Employment Tribunal Landscape

As you may well be aware, the employment tribunal landscape has been a bit like a game of ping pong in the last 5 years – first it’s free to raise a claim, then it’s not, then it’s free again.  This blog considers the changes and the benefits and drawbacks of the current status quo.

Employment tribunals are by no means a new concept, having been around since the 1960s.  However, in an increasingly litigious society, they gradually became common place in employment and the volume of spurious claims became unmanageable for the employment tribunal system.  It was felt that there was no deterrent against disgruntled employees to raise a claim, however frivolous it might be.  As a result, in 2013, employment tribunal fees were introduced meaning employees had to pay £1,200 in most cases to have their day in court – unsurprisingly we saw a sharp decline of nearly 70% in the number of claims and the employment judges were all able to breathe a sigh of relief at their more manageable workload.

However, in the period from 2013 onwards, there were rumblings the new regime was a barrier to justice, particularly from the employee union arena, and in the end the debate was settled and tribunal fees were once again abolished in July 2017.  In the last year, there has been an inevitable spike in tribunal claims with latest figures showing this is as much as a 90% increase.  In addition, the average cost of a claim for an employer is rising year on year and is currently around £16,500, not to mention legal fees, management time and potential reputational damage.

Whilst there was a collective groan from employers and HR professionals across the UK when the fees were abolished, let’s not forget the purpose of the employment tribunal system.  The balance of power in an employment relationship is weighted towards the employer in the main – the employee is reliant on the employer to provide work so they can pay their bills and earn a living.  Nine times out of ten, employers treat their employees fairly but we have all heard news stories of rogue employers… In this scenario, most people would agree it is right and proper the employee should not have to fork out a four figure sum to seek recompense for genuinely poor employment practices.  One could argue that a solution to the over-subscribed tribunal system could have been to consider lowering the fee levels or looking at a means tested approach, but as we know, this was not the decision taken as a conclusion to the legal challenge.

Many employers feel that the changes to tribunal fees take us back to the days of treading on egg shells with employees in a world of employment red tape.  The relatively short period of employment tribunal fees significantly reduced the number of frivolous claims seen inside an employment tribunal court, and we have once again, taken a step backward by abolishing the fees, in fact, claim numbers are at their highest level since the introduction of fees. 

Whilst tribunal fees appear to be here to stay, it is not all doom and gloom - employment tribunals can be avoided with good employment practices, including making sound decisions in relation to employees and having compliant policies and procedures.  In the light of the changing landscape with employment tribunals, it is recommended employers ensure compliance with employment legislation and HR best practice and take specialist advice on either an ad hoc or an ongoing basis.  For more information on how French Duncan can support you with HR, please contact us on 0141 221 2984 and we will be happy to discuss this further.

Pension Scams are evolving – useful tips to protect yourself

In truth, it is probably impossible to prevent all scamming completely, but we can and should narrow the open goal presented to scammers by the current occupational pension regime. Pension scams can be hard to spot and the scammers are evolving by being articulate and financially knowledgeable, with credible-looking websites that can make it difficult to differentiate the good from the bad. 

A scam is a confidence trick that attempts to defraud a person after first gaining their confidence. It then exploits natural human characteristics. Pensions are the perfect target for scammers as most pension scheme members have low confidence and understanding of their pension. It is therefore essential to raise awareness on all scams, but pensions in particular, where knowledge levels are generally so low.

To prevent yourself from being lured into a pension scam there are a number of trigger points to be aware of, especially when considering transferring out of Defined Benefit Schemes (also known as Final Salary Schemes). These are a selection of the main ones for you to consider:

  • Being contacted out of the blue (cold calling) about a pension opportunity and subjected to a ‘hard sell’
  • Being told that the transfer values of your pension will be due to change shortly, especially with the recent increase in interest rates, and that you need to take action before they do
  • Being rushed or pressured into proceeding with any pension transfer quickly
  • Being aware that you are giving up on a protected income at retirement to invest in potentially higher risk than is suited to your attitude to risk

These are only a few trigger points for you to be aware of.

In order for you to have the peace of mind that you are receiving correct advice that is most suited to you and your needs, it is important for you to carry out due diligence or background checks on your selected financial adviser. This can be done by checking the FCA register to see that the firm and the individual is authorised to give this specialised advice. Seeking advice from a Chartered Financial Planner ensures that you are dealing with advisers qualified to the highest degree with the highest level of ethics; alternatively perhaps consider being referred to a firm previously used and trusted by a friend.

You may also wish to refer to the FCA’s new Scam Smart website (www.fca.org.uk/scamsmart), which is designed to provide a general ‘sniff test’ on any unusual investments being proposed and to assist you generally with recognising potential pension scams.

It is important that you seek the correct advice and guidance at this crucial stage in your life from a trusted adviser. You need to feel comfortable and confident that they will be able to give you the peace of mind that what you are doing is most suited and tailored to your needs.

Please click here to get in touch or call 0141 221 2984 if you would like to discuss. 

Reform may be coming to pension tax relief

The way pension tax relief works is reportedly under review by the Treasury.

The apparent proposal is focused around a new flat rate of tax relief of 25% on pension contributions, regardless of personal income tax rates. Under this scheme, a gross pension contribution of £100 would require the same of everyone – a net outlay of £75 rather than the current £80. Pension tax relief is currently given based on your personal income tax rate, which means most people get basic rate relief at 20%, but high earners can get 40% or 45%.

The 25% rate would be a tax cut, in effect, for anyone other than those paying only basic rate tax, but could also potentially save the Exchequer around £4 billion a year. Increasing the flat rate to 28% would cost the Treasury the same as today’s mix of 20%, 40% and 45% reliefs, according to estimates from the Resolution Foundation.

With the government looking for an extra £20.5 billion in funding for the NHS, it isn’t surprising that pension reliefs are under consideration. Tax relief on pension contributions cost the Exchequer £38.6 billion in 2016/17, according to HMRC’s latest estimate, as well as over £16.2 billion of national insurance contribution (NIC) relief on employer contributions.

The government has eroded the value of pension relief over recent years by reducing the annual allowance: it is now £40,000, but in 2010/11 was as high as £255,000. While these more radical changes to tax relief would be politically sensitive – and the Chancellor has already experienced a backlash after his proposed increase of NICs in 2017 – the Treasury Select Committee has recommended the government give it “serious consideration”.

With the government needing to find money from somewhere, and more voices calling for a move away from full tax relief, a significant change to pension reliefs may be inevitable. Whilst in principle this might seem like a sensible idea, this is an area fraught with difficulty for this and subsequent generations, both in the populus and in Government. 

The dilemma for the Government is that there needs to be an incentive for individuals to continue to save for retirement.  There has been an increasing focus on encouraging individuals to make their own provision, which is turn has meant that progressive cuts could be made to the State Retirement Pension thereby limiting future spending commitments; the Auto Enrolment legislation is evidence of this  If tax relief on personal pension contributions is pruned back, this means that less provision will be being made by individuals and there is likely to be a consequent effect on the financial propriety of future generations unless corrective action is taken. We can therefore expect to see further ‘awareness’ messaging and possibly even further compulsory provision rules.

It is worth highlighting that the proposals to restrict pension tax relief only relate to contributions paid personally.  Many of our clients are in a position of control within their own business and have the ability to pay contributions from the company as part of their remuneration structure.  In the right circumstances, this can still be an extremely tax-efficient means of paying contributions, which could also be thought of as a tax-efficient means of extracting value from a business.  Additionally, for those in employment, it may be possible to engage in a salary sacrifice arrangement with your employer, which is likely to provide a boost to your pension contributions by virtue of the savings on National Insurance Contributions and could effectively circumvent the proposed restriction on pension contribution tax relief.

As with all matters in the financial planning area, particularly relating to pensions, it would be sensible to adopt a measured approach and to consider all of the available options before making any specific decisions, particularly if substantial amount of funds are involved.

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