The RABDF Retirement Provisions Survey
18 September 2008
The Royal Association of British Dairy Farmers is urging producers to think very carefully about their retirement provisions and is recommending they introduce 0.34ppl to the accounts to provide a pension of 50% of final salary for both themselves and their spouse.
“That was the conclusion we reached from the RABDF Retirement Provisions Survey, a research initiative conducted last month designed to establish the current true picture on dairy farms, and ultimately provide a percentage figure of earnings to be included in future dairy costings; family labour valued in the our 2008 study at 4.43ppl, rising up to 7.9ppl for those with hired labour,” RABDF chairman, Lyndon Edwards told a media briefing at the Dairy Event and Livestock Show today, Wednesday 17 September.
“Add together the labour plus pension values, and we recommend all farmers introduce the revised figure of up to 8.24ppl as an item in their dairy costings in order to demonstrate the true cost of milk production.”
RABDF was aware that most employers outside farming either provide a pension, or access to a scheme for their employees, where some, if not all costs are included in an organisation’s labour expenditure. The Association believed that dairy farmers should not be treated any differently, yet at the same time it realised that there are a number of ways that farmers can provide for their retirement, he explained.
Three quarters of the RABDF Retirement Provisions Survey respondees with existing pension provision had personal pensions, and they were diligently saving for retirement. On average they were saving 6% of their earnings into a personal pension, compared to a national average of 4%. Furthermore, 66% of the dairy farmers surveyed were saving into a private pension, compared to a national average of just 39%, Mr Edwards reported.
“These farmers believed that they needed a minimum of £18,407 a year in retirement, or £23,926 to live comfortably, figures that are broadly in line with research conducted by the Pensions Commission which found that the average household needed 50% of final salary as a minimum and 72% of final salary to live comfortably.
“Working with Hargreaves Lansdown, a leading independent pension specialist and financial adviser, we concluded that despite their prudence, at current contribution rates, these farmers are on course to achieve just 15% of their pre-retirement earnings in retirement. This is because the vast majority, 85%, of them are self-employed, and therefore do not receive an employer’s pension contribution worth on average 6% of salary. Worse still, being self-employed means that they forego any entitlement to State Second Pension, worth about £3,500 a year from age 65.
“Consequently, Hargreaves Lansdown advises a pension of 50% of final salary for both farmers and their spouses could be achieved at a cost of just 0.34ppl. We believe that this is a fair figure to enable dairy farmers not only to hand over their reins and enable succession at the age of 65, but also to live comfortably in retirement.”
He added: “Our findings have led us to recommend farmers to take the value of labour plus pensions and introduce the revised figure of up to 8.24p per litre as an item in their dairy costings in order to demonstrate the true cost of milk production. We trust that accountancy firms together with the entire dairy food chain including retailers, processors and Government, will accept this latest data and fully understand the real role and financial value of family labour. After all, the major of dairy units continue to be family owned and run.”
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