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North Devon

Business Action the voice of North Devon business

Disenfranchised businesses Why is North Devon ignored?

Remember to be yourself Effective social networking

The Good, the Bad and the Ugly Untangling the spaghetti of outsourcing the magazine of the

North Devon Business Alliance ‰

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‰ @northdevon

November 2010 | Issue 2

Contents November 2010

Preparing for 2011 W

elcome to the second issue of Business Action. Almost at the end of 2010, we’re looking to 2011 with realism. Government cuts will inevitably create hardship in some areas, but we have to identify the challenges ahead and overcome them. As can be seen from the media being wrong-footed by better than expected third quarter GDP results, it is very easy to talk down confidence. The task of North Devon businesses is to work, to build, to overcome and to succeed.

We know it won’t be easy and that’s one of the reasons why the North Devon Business Alliance exists: to support everyone in business. This issue focuses on getting a business into shape, from accounting to administration and marketing. We hope you’ll find the advice useful and can apply it to your own business. We also urge you to engage with all other North Devon businesses: at networking events; on twitter @northdevon; on facebook at ndevonbusiness and on LinkedIn. Here’s to success in 2011.

In this issue . . . Remember to be yourself .................................................................


A county and regional voice for North Devon................................


The Good, the Bad and the Ugly of outsourcing............................


Tenant insolvencies and landlord remedies ....................................


Preparing your business for tough times ahead .............................


Keep on marketing ...........................................................................


Implications of bribery......................................................................


Can mentoring help you?.................................................................


Support your local radio station .....................................................


Make your own NEST .......................................................................


Join the North Devon Business Alliance ..........................................


Business Action is edited and produced on behalf of the North Devon Business Alliance by Robert Zarywacz. Call 01271 879100 or email for editorial information or if you would like to advertise. The views expressed by contributors to this magazine are not necessarily those of the North Devon Business Alliance. Readers are advised to seek the advice of an appropriate professional before taking any action on any issue discussed inside. © 2010 North Devon Business Alliance 2

‰ North Devon Business Alliance

November 2010 Social media

Remember to be yourself Kevin Woodward advises against trying too hard to impress online


he North Devon Business Alliance promotes the use of internet based networking as a way of maintaining contact with our members in between monthly faceto-face lunches. It is important to maintain contact, because that is how we get to know one another, and why we start to recommend each other’s services.

Networking online I have been using the internet to make contact with new people, to maintain contact with both old and new friends and network with business colleagues. I have been using twitter for two years now, changing my allegiance from another business networking web site. Yes, I have it linked to facebook and to LinkedIn among others, and enjoy the interaction and banter that those web sites provide, but spend most of my online networking time on twitter. Interacting with the outside world from a home business Like many businesses in North Devon, I work from home and often alone, and need the interaction with the outside world as a break from the intensity of what I do. I find that break is similar to the meeting at the coffee machine or photocopier that used to happen when I worked in the big corporate world on the Slough Trading Estate, nearly eight years ago now. I have gradually built up a following of well over 2,500 and follow some 1,700 back. Not everyone who follows me is followed

back, and I have my reasons as to why not, but they’re welcome to follow my tweets. This brings me to Stephen Fry – a well known ‘British Actor, Writer, Lord of Dance, Prince of Swimwear & Blogger” – he’s followed by over 1.8 million and follows back just over 50,000 people, and I’m honoured to say that I am one of those that he follows back, but doubt very much whether he sees any of my tweets. However, a local blogger and writer wrote a very interesting blog back in August entitled The Day I Dumped @StephenFry and Kept @LlamaKevin Yes, @llamakevin is my twitter name and I find myself the subject of a blog along with the said Stephen Fry. It’s well worth a read, but it made me think why I had made that headline and not anyone else. I believe it’s because I remember to be myself. A sociable business I am on twitter to engage socially, to spread the word about myself and my business, what I do and to increase my business income. Yes, I have done that. I have had several QuickBooks training sessions booked, I have let out my holiday cottage at least three times through

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Social media November 2010

the use of twitter, I have had people come look at my llamas and goats, but in the main I am myself. I talk business, I BUSINESS ACTION talk politics (nothing ‰ Be sociable. contentious), I talk ‰ Don’t try to be something sport, I talk you are not. gardening, I talk ‰ Don’t try to sell too hard. North Devon, I talk ‰ Just be yourself. about the weather and, obviously, I talk llamas, but throughout I remember to be me. There are many people around who try to be something they are not. Some try to be the product that they try to sell, some are full of wonderful quotes, others are

constantly telling you where their web site is, but the people who get it the most are those who are just being themselves. Just be yourself So, if you are about to embark on twitter, facebook, LinkedIn or any of the other 100s of networking sites, remember to be yourself, because in the end that is important. Kevin Woodward t: 01237 451848 e: w: twitter: @llamakevin

Every picture tells a story T

hank you to Barbara Fry Photography for providing this issue’s stunning cover photograph. Barbara offers a range of


photography services and, by arrangement, can take business portrait photos at NDBA monthly lunch meetings.

‰ North Devon Business Alliance

November 2010 Seeing red

A county and regional voice for North Devon T he government’s spending review, reorganisation of business and community support and abolition of many public bodies are creating much change for businesses in North Devon. On the face of it, it is natural to be concerned that, suddenly, some organisations perceived to exist to support business and the community are disappearing. Yet a closer look at many South West and Devon organisations, both government and voluntary run, leads to asking what actual support they give to businesses in North Devon? Out of a sample of 28 of the many organisations, agencies and bodies purporting to serve the South West or Devon, 16 have main offices in Exeter, 8 in Bristol, 4 in Plymouth, 2 in South Devon, 1 in Truro, 1 in Somerset and 1 in Wiltshire (multiple offices are included in these figures). What connection with and relevance to North Devon do these organisations have? Does it matter? It does to businesses based in North Devon.

South West means more than Bristol and Exeter Sometimes there is a perception that business in the North of the county means farming, retail or tourism. Yet we have a broad mix of businesses with 22% of the workforce in manufacturing and a growing business services sector. We have world class

manufacturers exporting to every continent, hi-tech internet businesses and quality food manufacturers. Many businesses are online and network with other businesses in the area, across Devon, the region, the country and the world. They are DO YOU SEE RED? reaching out and Take the opportunity to voice your developing new opinions on a specific issue in the next relationships and issue of BUSINESS ACTION. exploiting the sophisticated networks now possible through social media. They provide products and services that were not possible five or 10 years ago and are embracing the opportunities offered by an increasing focus on sustainability. No need for must, must, must Yet all too often communications from these support organisations and quangos aimed at the area begin by saying “North Devon businesses must . . .” Why must we? How do they know what is happening in North Devon? Perhaps they could learn something themselves from North Devon businesses. Perhaps if these organisations came out of their cities and got to know the rest of the South West outside Bristol, Exeter and Plymouth, they would have a better understanding of the county and region, and be able to provide more effective support to remote areas such as North Devon.

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Seeing red November 2010

What do North Devon businesses want? Our requirements are clear:

‰ better representation at county and regional level

‰ to be treated with respect We want organisations to improve the way they communicate with the North Devon business community. That means getting to know us, our needs and especially our strengths. It means giving us the opportunity to WHO REPRESENTS NORTH DEVON? voice our opinions BBC Devon, Beacon South West, Black and listening to South West Network, Business Link, them. CIBSW, Community Council of Devon, It also means DCBC, DCC, DEBI, Devon Consortium, communicating Devon Education Business Partnership, with us as equals Devon Rural Network, Equality South and not in a topWest, Food and Drink Devon, GOSW, down, patronising Heart FM, ITV West Country, Regen tone. SW, RISE, South West Acre Network of That will involve Rural Community Councils, South West educating Forum, South West Screen, South West communications Tourism, SWAIN, SWRDA, Taste of the and PR offices and West, Visit Devon, UKTI SW external agencies, who, as professionals in their sector, ought to know better. Whose fault is it? While we are critical of some organisations, we recognise that the North Devon business community also has a responsibility to represent itself. The area has not been effective in making itself heard in the past and needs to make a bigger effort. Our challenge is to identify the opportunities to engage with the rest of the county and the South West, and to forge new, effective relationships for the benefit of all. That is one of the reasons why we established the North Devon Business Alliance: to fill the communications vacuum. 6

Need for rationalistion As well as more effective two-way communication, rationalisation of responsibilities and activities is needed. For any issue, there is a bewildering array of initiatives from multiple organisations. This creates confusion over which organisation to approach and which scheme is applicable. Businesses do not have the time for this, but require more coordinated support and a clear map of who provides what activity. The area of sustainability and the low carbon economy is a good example with initiatives from Regen SW, SWRDA, Business Link and CITB-Construction Skills South West among others. Sometimes, organisations seem to compete in promoting their own schemes with the effect of creating confusion in the marketplace. This not only prevents businesses from benefitting from what could be useful advice and support, but also damages all support organisations in the eyes of the business community. There is an urgent need for effective coordinated support at a county and regional level. Let’s work together We welcome the opportunity to communicate, to explain our needs and cascade information to North Devon businesses. We would like more events to be held here too. We also welcome guests to our monthly NDBA lunches to meet and get to know businesses here. And why not meet other North Devon organisations – FSB branches, chambers and networking groups? Let’s engage and explore how we can all exploit opportunities for the benefit of businesses in North Devon, the county and the region.

‰ North Devon Business Alliance

November 2010 Outsourcing

The Good, the Bad and the Ugly of outsourcing Stacey Pledge of B My Office untangles the spaghetti of this alternative to employment


s the government’s announcements of cutbacks keep coming thick and fast in a bid to manage the country’s financial deficit, people running businesses are preparing for leaner times ahead. Many are looking to find ways of improving efficiency to help them weather the impending storm. If someone in business is disorganised and not getting good value from their staff or suppliers, it can feel like an uphill struggle. Outsourcing tasks to a virtual business coordinator can offer many small businesses a suitable alternative to employing staff. But what is a virtual business coordinator? What can they do for you? And what can’t they do that an employee can?

What is a VBC? A VBC is an experienced and qualified business owner who does the same work as a secretary, personal assistant, office administrator and project coordinator combined. VBCs utilise technology, their skills and their network of professional contacts to meet the needs of their clients. Most VBCs offer a variety of services including: ‰general administration ‰database and web site development ‰graphic design ‰presentation preparation ‰telephone answering ‰credit control ‰bookkeeping

‰transcriptions ‰and more The Good ‰No need to spend time and money on training new staff. ‰No need to purchase extra office equipment (computers, software, office space). ‰A business only pays for the work a VBC actually does. ‰No need to worry about paying a member of staff sitting idle on a quiet day. ‰No need to worry about sickness, payroll, holiday, lost days and related paperwork/red tape. ‰VBCs keep themselves up to date. with the latest technologies and cost-saving services so they can pass on any savings to the businesses with which they work. The Bad and the Ugly ‰VBCs often charge a higher hourly rate compared with the cost of an employee. ‰They may not know the business as well as a trained employee. An employee is dedicated solely to the business and can work in-house. ‰Some VBCs may not work the same hours your business operates. ‰Many VBCs work from their own office and cannot provide a daily face-to-face presence.

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Outsourcing November 2010

‰Possible personality clashes between current employees and VBCs. BUSINESS ACTION ‰ The virtual business ‰ List what you want to outsource coordinator may be and clear reasons for doing it. unable to undertake ‰ Research potential virtual business all the tasks required if coordinators, get referrals, talk to they don’t have the their clients, request work samples. skills relevant to your ‰ Ask for a free consultation – most business needs. will offer this option. ‰ Consider both options of The Showdown employing staff and hiring a virtual What is most business coordinator, choosing important above what is right for you. everything else is that a business is actively reviewing its business processes and plans, and looking to reduce costs and increase productivity. The benefits of focusing on these areas and making positive decisions strengthen a business and make it


more likely to succeed than one that remains static. “When I start out to find somebody . . . I find him. That’s why they pay me.” A line from the film The Good, the Bad and the Ugly, a statement that represents a good virtual business coordinator. However, I would alter it to: “When we start out to support a growing business . . . we get things done. That’s why they pay us.” Stacey Pledge t: 01271 344545 e: w:

‰ North Devon Business Alliance

November 2010 Landlords and tenants

Tenant insolvencies and landlord remedies Emma Napper, commercial property lawyer at Slee Blackwell Solicitors, investigates


n these difficult times, landlords are increasingly finding their tenants are having difficulty in paying their rent. While it is always possible for a landlord and a tenant to agree a temporary rent reduction or a change in frequency payments (eg monthly rather than quarterly) in the hope of retaining the tenant, this does not always produce the desired result and can leave the landlord out of pocket. If the tenant becomes, or is about to become, insolvent, the landlord may be able to forfeit the lease and get back possession of the property either by peaceable re-entry or court proceedings for forfeiture. There are a number of procedural restrictions that the landlord would have to follow. Regardless of the lease terms, the landlord must comply with the statutory and common law rules and limitations on the exercise of this right. If this is the route the landlord wishes to take, it is essential to obtain legal advice before acting. The main advantages of forfeiting a lease through peaceable re-entry are that the landlord: ‰will obtain possession of the property. ‰is free to claim damages from a tenant who has breached their obligations to hand back the property in the condition required by the lease. The main disadvantages are: ‰Due to the poor economic climate the landlord may not want to regain possession of the property to risk it remaining empty for a long period of time with no rent being paid.

‰A tenant cannot be compelled to apply for relief from forfeiture, but a subtenant may do so. ‰If a tenant does make an application for relief from forfeiture, the landlord will not be able to enforce the repairing and other covenants until the tenant’s application has been decided. ‰If a tenant is insolvent or bankrupt, the landlord may not be able to recover the cost of any repairs. ‰The landlord may become liable to pay the non domestic rates. In some cases, where a tenant has become bankrupt or insolvent, the landlord may have little option in how to proceed, depending on which insolvency route the tenant has taken. If the tenant is a company, there are four avenues of corporate insolvency: 1 administration 2 company voluntary arrangement 3 receivership (including administrative receivership) 4 winding up (compulsory or voluntary) If the tenant is an individual, there are two avenues available to them: 1 individual voluntary arrangement 2 bankruptcy Administration If a tenant follows the administration route, the remedies of the landlord

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Landlords and tenants November 2010

for the tenant’s breach of covenant are severely restricted. In order for the landlord to be able to forfeit the lease, the landlord would need the leave of the court during the interim moratorium or consent of the administrator or the leave of the court once the full moratorium is in place. Voluntary arrangement Once the tenant has entered into a voluntary arrangement, the terms of the agreement will determine what remedies the landlord has against the tenant’s breach of covenant. This is so whether or not the landlord attended the creditors meeting or voted, or was notified of the meeting. The terms of the voluntary arrangement may be quite wide ranging and can include payments due in the future from the company. Forfeiture is generally available to the landlord, but it depends on the exact terms of the voluntary arrangement. Individual voluntary arrangement Once the application for an interim order has been made, the court may stay any existing court proceedings. Once the voluntary arrangement has been granted, the landlord may not bring any proceedings without the leave of the court. The landlord would need leave of the court to effect peaceable re-entry as soon as the tenant has made an application for an interim order. Receivership Even when an administrative receiver has been appointed, the landlord is able to issue or continue any court proceedings against the tenant for breach of covenant or they can forfeit the lease either by peaceable re-entry or by application to the court. 10

Winding up While the landlord is able to exercise forfeiture and court proceedings against the tenant without restriction during all stages of a voluntary winding up, the court may make an order restraining any action or proceeding on the application of another creditor or liquidator. Such an order arguably covers the landlord’s right to effect peaceable re-entry. Where the company is compulsorily wound up, the landlord only has until the winding up order is made to forfeit the lease. Once the winding up order is made, the landlord would need leave of the court. Bankruptcy Prior to a bankruptcy order being made, the court may stay any action or legal process. As the property of the tenant would become vested in the trustee in bankruptcy following the order being made, arguably the landlord would not need leave of the court to forfeit the lease. As you can see, it is not straightforward for a landlord once a tenant has taken steps (or has steps taken against it) because it has become, or is due to become, insolvent or bankrupt. Arguably, the landlord could achieve a better result by trying to assist any tenant through difficult times, especially when new tenants are in short supply. There are other avenues available to the landlord, but before taking any steps against the tenant it is best to obtain specific legal advice. Emma Napper t: 01237 425425 e: w: Free legal helpline: 0800 052 3620

‰ North Devon Business Alliance

November 2010 Accounting efficiency

Preparing your business for tough times ahead Business adviser and accountant James Hellyer looks at how to keep your business in shape


peaking to a lot of people in the North Devon business community, I have noticed a general attitude of optimism concerning the year ahead. However, there are many reasons why 2011 might herald an even harsher economic climate for the region. The South West is more reliant than much of the country on state sector jobs. Some of these jobs may well go as part of the comprehensive spending review. That will impact on secondary spend, as those made unemployed suddenly don’t have disposable incomes to spend in local shops, pubs and restaurants. Add to this the imminent increase in the rate of VAT and there’s a potential double whammy waiting to hit North Devon business. So what can you do to prepare your business for tough times ahead? Well, now is the time to have a business and tax health check. Business health check There are some things every business should know about itself. Many don’t because they are too busy working in the business to work on their business. Ask yourself these questions: ‰Do you know how much you have to sell each week or month in order just to break even (ie to cover your costs)? Identifying the required sales volume should be the first thing you do. ‰Do you know what your gross profit margin is? If it’s too low, you may not cover your overheads, and

even if you increase unit sales, you may just be working harder to continue making a loss. ‰Do you know whether all of your product lines are profitable? Perhaps you should find out and stop selling products that don’t make you money. ‰Are your prices right? One of the easiest ways to make more money is to increase your prices. Can you get the formula right so you can sell for more, but not lose customers? Tax health check When times are hard for your business, there are many steps you can take to accelerate tax relief or even to get HM Revenue to put cash into your bank account. Have you discussed any of the following with your accountant? ‰If your business is a sole trader or partnership with a year-end other than 5 April or 31 March, it may have early year’s profits (called ‘overlap profits’) that have been taxed twice. Normally, you get relief for this when the business stops trading. But wouldn’t you rather have that relief now? You can if you change your year-end. ‰If your profits have dropped in the last year, whether due to difficult

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Accounting efficiency November 2010

trading conditions or even capital investment, then you might be eligible for tax credits. Hundreds of millions of pounds to which people are entitled go unclaimed each year. Some of them could be yours. ‰ If your business BUSINESS ACTION has made losses, you ‰ Identify how much you need to sell could change its yearto break even. end to make sure you ‰ Ensure your profit margin is right. receive any tax refund ‰ Set your prices at the right level. due to you sooner ‰ Make sure you claim all tax reliefs rather than later. and tax credits. ‰ Are you claiming ‰ Consider changing your year-end to all the reliefs you are receive tax refunds sooner. entitled to? For example, if your business has spent money developing or improving products or services over the last year or more, then it may be entitled to enhanced tax credits. These can cut your tax bill and even generate a refund for businesses in their early years when you have yet to pay tax.


‰Have you considered the tax allowances available for plant and machinery purchases? If you were planning on buying something next year, purchasing it now, under some circumstances, could get you tax relief a whole year early. ‰Have you bought commercial property or are you thinking of buying some? Again, careful planning could maximise the amount of the property that’s eligible for tax relief. This is just a small sample of the topics you could be discussing with your accountant right now to ensure that your business is in the best trading and tax position possible when things begin to bite. James Hellyer t: 07736 686676 e: twitter: @james_hellyer Free initial business and tax health check

‰ North Devon Business Alliance

November 2010 Essential Interesting marketing

Keep on running Robert Zarywacz thinks businesses who maintain their marketing will thrive


double-dip recession would be far more interesting for the media than a sustained recovery. This was evident on the day when the Office of National Statistics published the third quarter 2010 UK GDP figures. Many commentators had been almost rubbing their hands with glee as they predicted 0.4% growth, only to retract their words when the actual growth was double their predictions at 0.8%.

Success is 50% sentiment . . . Unfortunately, sentiment is very powerful and can raise or reduce confidence very fast. While government cuts will inevitably mean a tough 2011, it would be very easy to talk ourselves back into recession unnecessarily. Conversely, we could just as easily talk ourselves into recovery. There is no logic to fickle confidence. . . . and 50% hard work But, as everyone in business knows, talk doesn’t run a business: hard work is needed for that. And marketing is one area which needs to work hard for any business wanting not just to survive, but to thrive. It also tends to be one of the first activities to be cut when businesses need to reduce costs. While cutting unnecessary costs and improving efficiency are desirable, this does not have to be at the expense of marketing, which is the fuel powering the engine of a business. There are many actions a business can take at little or no cost to keep its marketing effective.

Essential actions ‰Is your marketing material current? It should be easy to update your web site, especially if you use a content management system to add or change text yourself. ‰Are you using public relations? It can be as easy as picking up the phone to interest a journalist when you have a good story to tell. ‰Are you publicising your successes? Many businesses sit on material that could make powerful case studies. ‰Are you using social BUSINESS ACTION media effectively? ‰ Keep your web site up to date. Just changing your ‰ Contact the media with status once a day interesting ideas for stories. on LinkedIn or ‰ Publicise your successes. facebook or posting ‰ Use social media little and often. five tweets a day on ‰ Follow NDBA members on twitter, twitter can help facebook and LinkedIn. keep you in front of your customers. Keep on marketing Whether you have a budget to buy professional services or you manage your own marketing, this is just a small sample of many marketing activities that can generate more business. Robert Zarywacz t: 01271 879100 e: w: twitter: @robertz

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Bribery Act 2010 November 2010

Implications of bribery Liz Gibson, partner with Ashfords LLP, examines the Bribery Act 2010


n April 2011, the Bribery Act 2010 is due to come into force. Many businesses could be unaware of the implications this new legislation could have on commercial organisations. Far-reaching effects The Act will apply to all commercial organisations, including companies and partnerships, and creates an offence where they could be liable for acts of bribery committed by an associated person. An associated person includes an employee, agent or subsidiary. Commercial organisations are guilty of an offence of bribery if they, or an associated person, gives or receives an advantage for the benefit of their commercial organisation. Severe penalties Breach of the Act may result in a maximum prison sentence of 10 years or an unlimited fine. In the case of companies, the penalties can either be imposed on the company or the directors. Additionally, the Act has an international element which includes bribery committed by a UK organisation abroad or bribing, or being bribed, by an international organisation in the UK. Of particular significance is that commercial organisations could unknowingly be liable for acts of an associated party. The only defence


against such liability is for the commercial organisation to show that they have ‘adequate procedures’ in place to prevent persons associated with them from undertaking conduct outlined in the Act. Six principles for protection In September 2010, the Ministry of Justice published its consultation on guidance on how to deal with the implications of the Act for this area. The consultation outlines six principles to ensure a bribery-free business and which could provide a defence. These are: 1 Undertaking risk assessments 2 Top level commitment to antibribery within the commercial organisation 3 Due diligence of all business relationships 4 Clear, practical and accessible antibribery policies and procedures 5 Effective implementation of antibribery policies and procedures 6 Monitoring and review mechanisms to ensure compliance Review policies and procedures These principles are far reaching and will require a significant review by many commercial organisations of their current polices and procedures to ensure compliance with the Act. This could be a costly process, but failure to comply with the Act could be more severe. Liz Gibson t: 01392 333802 e: w:

‰ North Devon Business Alliance

November 2010 Business mentoring

Can mentoring help you? Kevin Woodward, business mentor, examines the business benefits of mentoring


o you know what a business mentor is? It’s someone outside your immediate circle of business colleagues who you can talk to about your ideas, problems, plans and staff. It’s someone who will ask you questions, maybe play Devil’s advocate, and make you think about all of the above things from a different perspective to ensure that you have covered all angles and that any business decision you make has been fully thought through. It’s easy to become so engrossed in your business that you can overlook even the simplest solution. While a mentor is not there to provide the solution, they are there to encourage you to think things through thoroughly. A mentor is not an adviser and not

a consultant; both have very different modes of operation and are there to help you achieve different things. There are few free mentoring schemes available, but there is a small scheme available in North Devon – see Mentors can provide a very good service to you and your business without costing a fortune and can give you the peace of mind that you often cannot get when talking to your regular business adviser, be they an accountant, a bank manager or, indeed, your mate down the pub. Kevin Woodward t: 01237 451848 e: w: twitter: @llamakevin

For a full range of

Affordable & Understandable Web Solutions & Marketing Solutions Contact: t: 01271 343753 e: w:

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Local radio November 2010

Support your station A one-month trial could lead to a permanent North Devon local radio station


orth Devon is poorly served by broadcasters, with both local television and radio stations withdrawing from the area recently.

At last, real choice From 9 November, for 28 days only, the Barnstaple area will enjoy locally generated content on The Voice 106 FM, which will be broadcasting from its newly equipped studio on the Square. The radio station is the brainchild of experienced local radio presenter Ian Starling, who believes the area needs its own radio station with a studio and presenters on the ground in North Devon.


Support your local station Many people and businesses support the idea of a local radio station, but The Voice 106 FM needs more than vocal support to succeed in becoming a permanent fixture on North Devon’s airwaves. It needs support from advertisers too. Give your support To advertise, call Ian on 01271 410106. To contact the studio, call 01271 323010 or text VOICE and a message to 66010. Visit the web site at The Voice 106 FM is an inspiration to everyone and demonstrates what it’s possible to achieve. The NDBA wishes Ian and everyone at The Voice 106 FM every success.

‰ North Devon Business Alliance

November 2010 Pensions Interesting

Make your own NEST Graham Lofthouse, of Devonshire Asset Management, reviews pension changes ahead


n the UK, we are now living longer and having fewer children. As a result, workplace pension schemes have come under increasing pressure, as they have to cover retirees for longer with less income. At the same time, most people are not saving enough for their retirement off their own back and the government is worried about its own ability to fund state payouts.

Government worries The government has long realised that compulsion – rather than incentive – is one of the best ways to ensure that people save. Their latest initiative is the National Employment Savings Trust (NEST), to be introduced in 2012 and designed to encourage

both a greater level of saving for old age and to open up access to saving for individuals who do not currently have a decent workplace pension scheme. What is NEST? NEST has been designed as a simple, low-cost pension plan aimed primarily at low-to-moderate income earners aged between 22 and statepensionable age. It will offer a small range of simplified investment options (including a default fund for those

Getting the numbers right James Hellyer MA ACA Chartered Accountant & Business Advisor

Making sure you pay the legal minimum in tax tel: 01237

421342 mobile: 07736686676 e-mail:

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Interesting Pensions November 2010

who cannot choose) and will be operated centrally as a National Pensions Savings Scheme. Every employee earning more than £7,475 a year* needs to be automatically enrolled in the scheme unless they either actively opt out or there is a suitable workplace equivalent scheme into which they will be enrolled instead. Contributions As an incentive, contributions will come from three different sources: ‰4% is contributed by the employee* ‰3% is then added by the employer, and ‰a final 1% is added by the government (in the form of tax relief). * Contributions are a percentage of eligible earnings, ie: those between £7,475 and £33,540, initially quoted as at 2007 and subject to indexation (in line with earnings) through to 2012.

So for every £1 the employee contributes, an additional £1 is received, doubling the amount they have actually invested on their behalf. Unanswered questions There are still some unanswered questions about exactly what NEST will look like. They are intended to be simple, yet the structure so far appears quite complicated and information is relatively scarce. However, businesses can be sure that their pension costs are going to rise – so there are a few things they need to start considering now to ensure they are prepared in time. Not every business will currently have a workplace scheme in place and some existing schemes may simply not meet the government's minimum criteria. Hence, to cover the additional contributions which may be

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November 2010 Pensions Interesting

required – or simply to extend existing arrangements to cover employees who do not currently participate – it is likely that costs will rise. Businesses need to start making some decisions. Meeting the minimum criteria To meet the minimum criteria necessary to offer an alternative to the government scheme, workplace pensions will need to offer: ‰Auto-enrolment – within 90 days of joining. Auto-enrolment is not currently allowed on group personal schemes, but will be introduced for 2012. In the meantime, this could be arranged with a simple change to the contract of employment. ‰Minimum accrual rates – for final salary schemes must be at least 1/80th for contracted out schemes or 1/120th for contracted in schemes. ‰Minimum contribution rates – for money purchase arrangements must be at least 8% of eligible earnings. Weighing advantages against the disadvantages The simplified administration and ability to ‘outsource’ minimum pension arrangements to another party may seem attractive for some companies. However, for some employees, particularly mid- and high-earners, pensions remain one of the more attractive benefits which they look for when deciding whether to take a job. The rigidity of joining the government scheme may reduce the attractions of this benefit for such employees when compared with potentially more flexible offerings from other potential employers.

Workplace scheme vs government scheme The following is a simple three-point checklist of issues to start the conversation within companies as they decide what to do for their own employees: The profile of employees How many are low, middle or high earners and what are the existing arrangements, particularly compared with other similar employers in the BUSINESS ACTION area? ‰ Establish the earnings profile of your employees. Existing schemes ‰ Check to see if existing pension Does an existing schemes meet minimum criteria. scheme meet the ‰ Plan to meet higher contribution minimum requirements before they are criteria? How flexible introduced. are the contribution ‰ Start seeking advice now. arrangements between different types of employee and what are the contractual arrangements with existing staff? Getting ahead of the changes Are there any plans or thoughts in progress already to meet the contribution requirements and set up or adapt an existing scheme to get ahead of the changes? Every employer will be in a different situation and will need individual advice. Ensure that you understand the implications and plan your costs accordingly by seeking professional advice sooner rather than later. Graham Lofthouse t: 01271 327500 e: twitter: @glofthouse

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NDBA Business Action issue 2  

The magazine of the North Devon Business Alliance

NDBA Business Action issue 2  

The magazine of the North Devon Business Alliance