HLS Annual Dinner

Pension freedoms – retirees now have a whole host of new options

There is now much greater flexibility around how you take your benefits from Money Purchase Pension (Defined Contribution) schemes, which include Self-Invested Personal Pensions (SIPPs). Since the rules governing how pensions can be taken have been dramatically relaxed, more people are using pension freedoms to access their retirement savings, but the amount they are individually withdrawing has continued to fall, according to the latest data from HM Revenue & Customs (HMRC). Pension freedoms have given retirees considerable flexibility over how they draw an income or withdraw lump sums from their accumulated retirement savings. There is no doubt the pension freedoms have been hugely popular.

What are your retirement options to consider? Leave your pension pot untouched for now and take the money later It’s up to you when you take your money. You might have reached the normal retirement date under the scheme or received a pack from your pension provider, but that doesn’t mean you have to take the money now. If you delay taking your pension until a later date, your pot continues to grow tax-free, potentially providing more income once you access it. If you do not take your money, we can check the investments and charges under the contract.

Receive a guaranteed income (annuity) You can use your whole pension pot, or part of it, to buy an annuity. It typically gives you a regular and guaranteed income. You can normally withdraw up to a quarter (25%) of your pot as a one-off tax-free lump sum, then convert the rest into an annuity, providing a taxable income for life. Some older policies may allow you to take more than 25% as tax-free cash – we can review this with your pension provider. There are different lifetime annuity options and features to choose from that affect how much income you would get.

Receive an adjustable income (flexi-access drawdown) With this option, you can normally take up to 25% (a quarter) of your pension pot, or the amount you allocate for drawdown, as a tax-free lump sum, then re-invest the rest into funds designed to provide you with a regular taxable income. You set the income you want, though this might be adjusted periodically depending on the performance of your investments. Unlike with a Lifetime annuity, your income isn’t guaranteed for life – so you need to manage your investments carefully.

Take cash in lump sums (uncrystallised funds pension lump sum (UFPLS)) How much of your money you take and when is up to you. You can use your existing pension pot to take cash as and when you need it and leave the rest untouched, where it can continue to grow tax-free. For each cash withdrawal, normally the first 25% (quarter) is tax-free, and the rest counts as taxable income. There might be charges each time you make a cash withdrawal and/or limits on how many withdrawals you can make each year. There are also tax implications to consider that we can discuss with you.

26 HAMPSHIRE LEGAL Cash in your whole pot in one go You can do this, but there are important things you need to think about. There are clear tax implications if you withdraw all of your money from a pension. Taking your whole pot as cash could mean you end up with a large tax bill – for most people, it will be more tax-efficient to use one of the other options. Cashing in your pension pot will also not give you a secure retirement income.

Mix your options You don’t have to choose one option. Instead, you can mix them over time or over your total pot when deciding how to access your pension. You can mix and match as you like, and take cash and income at different times to suit your needs. You can also keep saving into a pension if you wish, and get tax relief up to age 75.

Think carefully before making any choices The pension flexibilities may have given retirees more options, but they’re also very complicated, and it’s important to think carefully before making any choices that you can’t undo in the future. Withdrawing unsustainable sums from your pensions could also dramatically increase the risk of running out of money in your retirement. ■

Steven Vallery, S4 Financial Limited

Lessons learnt by our PII Brokers & Client Managers in 2019

It’s no secret that the market has hardened, capacity is not what it used to be, and firms are finding it increasingly difficult to obtain competitive quotations. With this in mind, we thought we would share some of the key points that we learnt in 2019 in relation to the application process of your Professional Indemnity Insurance.

1. Complete your Proposal Form in good time. We suggest getting started 4 – 6 weeks in advance of your renewal date in order to give yourself the best chance at multiple options. As the year goes on capacity dwindles and Insurers are not as hungry to write new business. This can often result in increased premiums and lack of Insurer options. 2. Choose your Broker wisely. You do not want to be limited to only one or two Insurers so it is key that you ask who they have access to, who they intend to approach and whether the Insurers they seek to obtain a quotation from are ‘A’ rated. 3. Work closely with your Broker, being open and honest about your firm and the work you undertake. An experienced Broker will work closely with you throughout the process, will understand the risk and know how to present it with clarity to an Insurer. This will ultimately result in less questions and confusion, making it a straightforward application. Poorly presented, it could lead to delays, subjectivities and even a decline. If this happens it is never easy to get the Insurer to review your application again. 4. Do not approach too many Brokers, especially if they have access to the same markets. This will mean insurers are viewing your proposal form on numerous occasions from various sources, which may result in them not taking the risk seriously enough. if this happens, Insurers are not likely to prioritise your application. At Hera Indemnity we have the widest access to insurers therefore limiting the number of Brokers you would need to approach. 5. Provide as much information as you possibly can. Insurers will typically ask for the following as standard; • Accounts for the last completed financial year, which matches the stated turnover within your Proposal. We often see conflicting Proposal Forms and Audited Accounts, this is sometimes due to declaring profit instead of turnover in error! • Claim summaries no older than three months, covering the last six years • Any procedures or cyber insurance policies in place to mitigate cyber risk • For new firms, C.V.’s of key personnel, Cash Flow Forecast and a Business Plan 6. Highlight any material changes from previous years, give detailed explanations on any major claims and what remedial action has been undertaken to prevent a repeat of this claim. 7. Close-off any notifications on the claim summaries which are sometimes left open unnecessarily. 8. Check the policy wording to ensure you are aware of any exclusions and exactly what your policy will provide cover for. ■

John Kilmartin Head of Marketing, Hera Indemnity

Professional negligence and loss of chance

Part 2

In Edwards v Hugh James Ford Simey Solicitors [2019] UKSC 5 the claimant (Mr Arthur Watkins) was a retired miner suffering from vibration white finger (VWF) which is caused by excessive use of tools that vibrate. The condition can result in a reduction in grip strength and manual dexterity in the fingers. The National Coal Board was found to be negligent in not taking reasonable steps to reduce the risk of VWF. A government scheme was set up to provide compensation for VWF. The scheme provides for two types of compensation equivalent to general damages and special damages for personal injury. The special damages included a services award which was awarded if a claimant could not do six routine domestic tasks, for example gardening and DIY, because of VWF and required assistance to do them. There was a rebuttable presumption that the six routine tasks could not be done so that claimants qualified for a services award in addition to general damages unless there was concurrent medical evidence that the disability had another cause.

The professional negligence claim

The claimant instructed the defendant, to pursue a claim for VWF and that claim ultimately fell within the scheme and the claimant was medically assessed as being entitled to general damages but also to the presumption in favour of the services award. After receiving a letter from the defendant dated 18 February 2003 advising of an offer of general damages of £9,478 in full and final settlement and asking for instructions the claimant had a telephone conversation with an employee of the defendant. He said he was happy with the general damages offer but that he did not want to pursue the claim for the services award. The claim was settled on that basis. Nearly five years later, in January 2008, the claimant saw a newspaper advertisement offering assistance to any ex-miner who may have had his VWF claim settled at an undervalue. As a result, the claimant instructed fresh solicitors and a professional negligence claim was made against the defendant in 2008, claiming that the firm’s negligent failure to give him competent legal advice deprived him of the chance to claim a services award. His estimated loss was £6,126.22 plus interest. The claimant died in 2014 and his daughter Mrs Jean Edwards continued the claim on behalf of his estate.

28 HAMPSHIRE LEGAL In the trial at the County Court in Leeds it was accepted that to succeed in the tort of negligence the claimant had to establish breach of duty, causation and loss. The trial judge found that there had been a negligent breach of duty and that causation was established. Thus, the advice given had been negligent and had the claimant received appropriate advice he would have pursued his services claim. However, there was new medical evidence (that did not apply the presumption) to the affect that claimant’s symptoms would have been insufficient to succeed on the services claim. The court therefore held the claimant had suffered no loss and dismissed the claim. The claimant successfully appealed to the Court of Appeal [2018] EWCA Civ 1299 and the defendant appealed to the Supreme Court. The issue for the Supreme Court was whether the further medical evidence should have been taken into account when assessing the prospects of success of the negligence claim.

The decision of the Supreme Court

The Supreme Court unanimously dismissed the appeal (Lord Lloyd-Jones gave the lead judgment) and remitted the matter for an assessment of quantum. The claimant had established a loss of something of value, i.e. that his service claim had a real and substantial rather than merely a negligible prospect of success. The medical evidence was not relevant to the issue of loss with Lord Lloyd-Jones holding that this retrospective evidence was ‘simply not relevant when constructing the counterfactual situation which would have arisen if Mr Watkins’ solicitors had fulfilled their duty to him’. The claimant had lost a chance of obtaining the service award.

Comment

The judgment makes it clear the normal civil procedure rules (which would allow the retrospective evidence) do not apply to claims under the scheme with is supposed to fairly facilitate the handling a large number of claims. Many other claims under the scheme (and under other schemes) will now be settled. The question is whether this principle that claims cannot be retrospectively reduced in value will apply to professional negligence claims generally. That could have serious implications for solicitors, legal executives and their indemnity insurers. This case should be contrasted Perry v Raley Solicitors [2019] UKSC 5 (see Hampshire Legal May 2019) a case involving the same scheme where the claimant was dishonest and had he been honest there would have been no loss of chance of obtaining the service award. In contrast the claimant in Edwards was honest and did lose that chance. ■

Simon Parsons HILS member

The most common obstacles to a successful law firm sale

The vast majority of law firms in the UK remain private client focused businesses with a local town presence. They are typically owned and run by an aging equity partnership where the succession treadmill stopped years ago because society and the business of law began to evolve away from the traditional law firm model prevalent when many of these firms were originally established.

Consolidation in this market shows no signs of slowing down anytime soon with the main drivers for this continued activity being inadequate succession planning, the demographic of sub £2m turnover ownership, financial constraints, reforms to the legal services market, ever increasing professional indemnity premiums and the growing burden of regulated management.

Without internal succession or sale to an external party, the only way to retire is cessation and closure, which is usually a very expensive option with SRA risks attached. With this in mind, what should you do if you are thinking about your own exit plan?

For all the reported mergers in recent years, there have been many times more aborted discussions and it is useful to understand why these deals failed to happen because it is rarely due to a simple change of heart. Typically, it is because of poor planning, poor preparation or ponderous execution on the part of either buyer, seller or both. This is hardly surprising when one considers that the most common complaint we hear from independent practitioners is the amount of time they need to spend in compliance, practice management and reporting versus client needs and ‘being a solicitor’. Equally, sellers often fail to consider what the buyers will be looking for and take few if any steps to get their business into a stronger position prior to commencing talks. Add to this heavy workload the requirement to devise and execute an effective exit strategy and it is remarkable that anyone manages to begin implementing their retirement plans within a timeframe that makes a good outcome more likely.

Another significant factor that could drastically improve quality of options and a benchmark against which to measure offers, is engaging with a wider market than just your local competitors; particularly out of area firms that may wish to operate within your current geographic location. Historically, many older solicitors have been reluctant to be proactive in their search because of the perceived risk of being seen to be ‘on the market’ and instead tend to wait for an approach from a competitor before looking into possibilities properly. This reluctance must be overcome if strength of negotiating position and the quality of outcome is important to the seller and the remaining staff.

The unintended consequence of the typical approach is that difficult questions get kicked down the road until they finally become unavoidable. Discussions break down after months of hourly time has vanished, the firm may be in a worse financial position than it was at the outset and you have returned to square one having lost six months.

Many of these risks can be mitigated by speaking with a professional intermediary who can provide guidance through the whole process alongside a sympathetic ear. Ortus Group has worked with many law firms across the UK to facilitate retirement plans for independent firms as well as assisting consolidators in growing their footprint. Managing Director, Colin White has written a white paper on mergers and acquisitions in the UK legal sector. ■

Colin White Founder and Managing Director, Ortus Group

For over 30 years, Clive Emson Land & Property Auctioneers have been offering a bespoke auction service across the south of England, with some 40 auctions held across the region publicised in eight auction catalogues, which includes eight sales a year held at the Solent Hotel at Whiteley covering Hampshire and the Isle of Wight.

Sale by auction has long been a very popular method of sale for executors, mortgagees and statutory bodies keen to prove best value, with a significant number of people present at each auction sale to verify that each and every Lot is sold for the best possible price on sale day, and with the benefit of a speedy and defined timescale with an exchange of contracts on the fall of the Auctioneer’s gavel.

Run down and dilapidated properties are always an auction staple, while auction is also an excellent way of establishing the value of unique and unusual and difficult to value properties, and a sale by auction can also be a very effective means of settling family disputes in property matters.

Auctioneer and Regional Director, Rob Marchant, who is based at the firm’s Whiteley office commented: “Run down and dilapidated properties tend to be few and far between in this day and age where people are so much more conscious of the value of their homes and keep them maintained accordingly. As in any walk of life where supply and demand are out of kilter, this means fierce competition when these opportunities become available. On so many occasions in the past, we have been able to achieve sale prices for this type of property significantly in excess of even the very best of estimates from private treaty

The Leading Independent Regional Land & Property Auctioneers Covering Southern England

agents through the benefits of open and competitive bidding in the auction sale room. The number of potential buyers for ‘projects’ far outweighs the number of potential sellers, and a public auction being an open and transparent sale process gives all interested parties an opportunity to bid and compete for the right to buy”.

Rob further commented: “We have in the past settled so many disputes in respect of property value. Ultimately, any property is worth what people are prepared to pay rather than what we, the seller, or indeed any other property professionally thinks the value may be, though I am very pleased to report that more often than not a sale price in excess of our expectations can be achieved”.

Clive Emson Auctioneers will be holding eight further sales at the Solent Hotel in 2020 beginning on Friday 14 February, with further auctions on 25 March and 1 May, and then at regular dates throughout the year. ■

DISCOVER a great way to buy and sell land and property

Our next five-day land and property auctions will be held on:- > 23rd - 27th March - Catalogue available from 28th February. Entries close 24th February > 1st - 7th May - Catalogue available from 10th April. Entries close 6th April

Entries are continually invited. If you own a property or parcel of land which may be suitable for a sale by public auction, please call us for a no obligation appraisal. We also offer an *online auction service.

*Online Auction Dates Please call for information