ARMA Launched

Argyll Risk Management AwardsArgyll Insurance Group has announced the launch of the inaugural ‘Argyll Risk Management Awards’. Argyll’s Chairman Kevin Young comments:

‘Risk Management remains a vital tool in any successful business. Not only does it assist with the health & safety, financial stability and legal compliance of a company, it can also have the benefit of increasing efficiency, productivity and customer service levels whilst ensuring insurance premiums are kept to a minimum. We are looking to award clients who demonstrate a real commitment to the reduction of the risks facing their businesses’.

Argyll clients wishing to be considered for an award should visit the Argyll website and download the form. Alternatively you may be nominated by your Argyll Account Director. The ARM Awards will be judged in two categories, by Argyll’s qualified Risk Management and Legal team:

• Consistent good practice
• Innovation

Entry to the awards will be neither complex nor time consuming, as a simple statement is all that is required. Similarly, a simple but effective initiative is as likely to be successful, as a more complex strategy.

Argyll’s Risk Management specialist Stuart Rodway comments ‘Winning this award will demonstrate both the company’s and its individual employee’s commitment to reducing risk’.

Closing date for entry is 5pm on September 29th 2006, by which time a completed entry should have been received by your Argyll Account Director or nearest Argyll office.

Winning businesses will receive a 7.5% discount off their 2007 Property Insurance premium, a framed certificate and a trophy for display a the business premises as well as replicas for those employees involved in he entry.

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Decisions, decisions...

Decisions, decisions...The Inland Revenue has sought to simplify pensions with the implementation of the Pensions Act 2004. In the light of these changes, Argyll’s Gordon Murdoch comments: “Much has been written about the pre-retirement changes and I will not dwell on those here. For some individuals the pre-retirement changes will have limited impact, for companies there are many issues to address. However, at pension age we will all have to come to terms with changes introduced by the Act.

Historically, retirement involved one choice –do you or do you not want the tax free cash sum being offered? From 6th April this has been expanded:

Lifetime Annuity

Guaranteed? Capital protected? Level or index linked? With or without dependant’s pension? Standard terms or impaired life? Guaranteed Annuity Rates?

Investment Linked Annuity

As above plus level of risk prepared to take?

Income Drawdown

How much income? Is income required? How much risk to take? Is flexibility important? Is death benefit important?

Post Age 75 Income Drawdown

As above plus will the revised income be enough? Inheritance Tax Planning?

Argyll Financial Services’ highly qualified advisers have the expertise and experience to conduct a detailed review of these options with you. They can explain how they apply to you and assist you through the retirement maze”. To discuss matters please telephone Gordon on 01634 360000 or contact your nearest Argyll office.

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Flu Diligence

Flu Dilligence The possibility of an Avian Flu pandemic has been much publicised in the UK press in recent weeks and at the time of printing this newsletter there were confirmed cases as close as continental Europe and one identified in Britain. Many agencies have however suggested that it was always a case of when rather than if the threat would breach our shores. Argyll’s Risk Management specialist Stuart Rodway provides some guidance on how businesses should be responding:

Many organisations and government agencies have offered predictions about the likelihood of a pandemic as well as suggesting that as much as 25% of a business workforce might be affected for several weeks and that up to 150 million people worldwide may not survive an outbreak. Although these forecasts emanate from some extremely well informed sources, the problem businesses are having is that nobody really knows what the final outcome of this threat will be. As a result, it appears that many companies are opting for a ‘let’s wait and see’ approach to the management of the impact of Avian Flu upon their business continuity.

‘The let’s wait and see’ approach leaves a business and its people less prepared and more vulnerable to the impact of any potentially catastrophic incident. There is a need for ‘key’ resources within a business to produce a generic plan to respond to all types of major threats to include procedures that anticipate the need for varying responses to different types of threats.

The Business Community Plan (BCP) should recognise that the main elements of the response required for a pandemic would also apply to any chemical, biological, radiological or nuclear incident, a major flood or fire, vandalism or theft and an atrocity such as that experienced in New York in the September 11th terrorist attacks. Before the World Trade Centre attacks many businesses saw BCP as an inefficient use of resources, an expenditure which does not bring any return on investment. But statistics tell a different story. As a result of the earlier 1993 WTC bombing, 150 companies went out of business, out of 350 affected. Furthermore an incident does not need to be as dramatic as a terrorist attack or pandemic to have a massive impact on an organisation. For instance, 44% of businesses that suffer serious fire fail to reopen and 33% of these fail to survive beyond 3 years. Every company needs to be ready with a plan of action that it can execute immediately an incident threatens the continuity of their business.

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New Age?

New Age
“Recruitment and Interview procedures need to be reviewed ”

From October 2006 new Age Discrimination legislation will be introduced to bring the UK in line with the EU’s Employment Directive on Equal Treatment. This change will make age discrimination in employment and vocational training illegal and it will cover private and public sectors. It will mean that businesses will have to rethink issues such as recruitment messages, pay structures, staff promotion strategies and contracts of employment.

Less direct examples of discrimination will even fall foul of the law. Recruitment advertisements will need reviewing as the use of statements like 'would suit someone with experience and maturity' could be indirectly discriminatory to younger workers. Conversely describing a business as a ‘young company’ could also lead to a discrimination case. Another aspect of the legislation is the introduction of a default retirement age of 65. In practice this will mean that most employers will not be able to ‘force’ retirement upon their employees earlier than this.

Argyll Director, Chris Gibson comments ‘Recent research has indicated that many businesses are still unaware of the legislation and of those that are, many have not yet begun to address the implications. In 2006 there are more 55-64 year olds than 16-24 year olds in the UK for the first time and businesses need to adapt to support the new profile of the UK human resource. Training, flexible working, pensions, employers liability and healthcare insurance will all need to be considered as a part of a review, so that a company is prepared in advance of the new legislation’.

The USA is a good indicator of the potential impact of the new laws, as similar rules are already in place there. Over the past 12 years, nearly 20% of all discrimination cases in the USA were based on age. Assuming that the UK experiences a comparable rate of age discrimination cases, British business could eventually be looking at over 40,000 cases annually, amounting to around £1.13 billion and these figures do not include the substantial legal fees incurred by companies defending these actions.

Chris continues ‘It is essential that the correct practices be adopted by businesses well in advance of October, to avoid discrimination actions against them. Additionally employers should look to review their Employment Practice Liability Insurance and Legal Expenses cover to ensure that if they find themselves in a tribunal, they will have provided adequate protection for their businesses. Another important consideration is Directors and Officers Liability insurance, which will also need to be reassessed as any breaches of the new regulation could lead to corporate decision makers being held personally accountable’.

Argyll Group can advise upon all of the possible implications of this new legislation, review insurance protection as well as the impact upon pensions and healthcare provisions. Please contact your account director or nearest Argyll branch for further details.

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Proud to be of service

Proud to be of service
Kevin Young
"We have developed a business which offers the best of both worlds"

Following on from the Interview with Kevin Young in last summer’s newsletter, Argyll’s Chairman answers a few more questions about the business and the changes he has seen in the Insurance Industry in the last 12 months:

2005 saw the introduction of FSA regulation for the Insurance Broking Industry. What impact has this had upon Argyll and its customers?

For the few years before any announcement, I had considered that regulation of the broking industry was both inevitable and necessary, it was simply a case of when and how. In view of this, Argyll was able to develop its business shape and strategy to anticipate the likely requirements of future regulators. We used business models such as the Investors in People and ISO 9000 quality standards to assist us in getting this right. We also drew from existing regulatory and self policing regimes to fine tune our operations in preparation. We also had a good knowledge of FSA regulation as our Financial Services Division was already overseen by the FSA. The result of this foresight and planning has meant a fairly smooth transition for Argyll, assisted by the sheer hard work, dedication and professionalism of our staff.

Our clients ultimately benefit from greater confidence in the UK financial system, reduced scope for financial crime and greater protection. In order to achieve this there was obviously a significant amount of additional ‘procedure’ added to the insurance broking process and we are starting to charge a nominal fee to simply cover some of the costs of providing the extra benefits of the new regulatory regime.

Argyll has grown rapidly in recent years, in part as a result of acquisition. How easy has it been to integrate newly acquired businesses?

Each of the six acquisitions we have achieved has been different. Indeed that is fundamentally what made each one attractive to Argyll. In order for success, it was important that we identified businesses that would add value, above and beyond the inherent worth of the individual company In some cases this meant an acquired business brought additional skills to Argyll thereby benefiting our customers with a more rounded insurance and financial planning solution. In other cases we have been able to enter new markets or provide additional niche services as a result of acquisition. We understood that each acquired business unit was successful in its own right, with its own personality and skill set. In order to achieve integration we adopted a ‘don’t fix it, if it is not broken’ philosophy. There were of course logistics issues such as the integration of computer systems and the adoption of unified procedures but the real key was to ensure that new staff understood their worth to both Argyll and its customers. Additionally Argyll’s experienced management team could be used by them as a valuable additional support mechanism allowing a focus upon customer service. The overall result has been the formation of extremely strong business units in each of our three branches.

What areas do you consider that Argyll outperforms its competitors?

We have developed a business which can, in a number of ways, offer the best of both worlds. To name a few examples, we offer both general insurance and financial services as a one-stop shop; we have a dedicated in-house claims department; qualified health and safety, risk management and legal advisers and we have teams dedicated to specific market sectors. However, our main strength is that we are large enough to provide access to markets and services in line with a national competitor, whilst providing the regional, customer service focus of a smaller independent business.

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Income tax was first introduced to help defeat Napoleon

When is your Tax Freedom Day?

Income Tax, Capital Gains Tax, Inheritance Tax, Council Tax, Stamp Duty, Corporation Tax, Value Added Tax, National Insurance Contributions….

Taxation has a major impact on our lives. In the 1960s the concept arose of Tax Freedom Day, which is the date in the year when we stop working for the Government. To put it another way, it is the point where we have earned enough to meet our annual tax bill and are now working for ourselves. The underlying calculation factors in the Gross Domestic Product (GDP) and The Government’s total tax revenue. This is mapped onto a calendar to give Tax Freedom Day.

Britain's income tax was introduced in 1799 as a 'temporary' measure to help fight Napoleon, set at 5% on the highest incomes. But Tax Freedom Day shows that it was in much more recent times that taxes really took off. In 1964, British citizens worked until 23rd of April for their government. By 1970, they had to wait until 26th May and the burden has been about that high ever since, with last year’s falling on May 31st. The UK Tax Freedom Day changes, principally to reflect underlying tax collection.

It is important to remember that this is a national average; individuals will have a different date. For example in 2001 throughout the UK, the date was 2nd of June, whilst taxpayers in Scotland had to wait until 25th June and those in Wales until 15th July.

However with careful planning your Tax Freedom Day could be brought forward. It is estimated that UK residents pay as much as £5.7 billion a year more than they need to in taxation. Argyll Financial Services has a wealth of experience in minimising your tax burden thereby bringing your Tax Freedom Day forward to the earliest possible date. Experienced and qualified advisers can recommend strategies for reducing taxation, including tax efficient savings (short and long term) and Inheritance Tax planning.

To discuss how you can retain more income and capital for you and your family instead of giving it to the Chancellor, contact your nearest Argyll

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A whole new world of opportunity?

A whole new world of opportunity?
Is globalisation changing the way we invest?

Today’s investor faces a plethora of choices when deciding where to put their money. The accelerating globalisation phenomenon of recent years has opened up a range of opportunities for UK investors, who are now able to allocate funds to global investment vehicles that provide exposure to markets ranging from Argentina to Venezuela, via China, Japan and Russia. Global investment products give investors access to a much wider range of stocks and investment themes and, thus, increase the potential returns on investment, but without necessarily materially increasing risk.

The changing face of the global economy has seen lesser developed countries such as China take an increasingly prominent role in worldwide growth. China’s economy has grown at a phenomenal rate over recent years (9.9% in 2005 alone), establishing it as a major engine of growth for the Asian region, and has played no small part in the explosion in the global commodities market as huge amounts of raw materials have been required to fuel such massive economic expansion. This has consequently been supportive for the trade balances of resource-rich countries such as Brazil, South Africa and Australia.

Fund managers running global funds are able to exploit such macro themes on a worldwide scale; for example by taking exposure to Chinese consumer stocks as income levels have been boosted by economic expansion, while also holding positions in Brazilian mining stocks, which have benefited from rising commodity prices caused by surging demand.

At the same time, these funds are able to reap the benefits of diversification, which reduces portfolio risk by investing in markets that are uncorrelated and therefore unlikely to move in the same direction. Taking 2005 as an example, two of the strongest performing countries among the largest global equity markets were South Korea and South Africa, generating real local currency based returns of 55% and 42% respectively. Compared with returns for the UK of 19%, such figures start to make a compelling argument for investing in a global basket of equities.

Discussing market returns in terms of local currencies introduces another potentially intimidating element of global investment however: that of exchange rate risk. Investors may be discouraged from investing overseas in the belief that investing internationally puts them at risk of exchange rate fluctuations, which may reduce the value of their returns when converted back into the investors’ domestic currency. However, research suggests that the risk posed by exposure to exchange rate fluctuations resulting from investment in global markets is minimal over the long-term, and is outweighed by the benefits of diversification resulting from a global portfolio.

Investing money in a global portfolio gives investors access to a wide range of investment themes and potentially considerable long-term returns, while not necessarily increasing the risk in the portfolio. Little wonder that a shift is being witnessed towards a more diverse and global asset breakdown within investors’ portfolios. Given such a compelling investment argument, this is a trend that looks set to continue.

For assistance with the global investment choices available to you please contact your nearest Argyll office.