According to research conducted by accountancy firm Smith & Williamson, 53 per cent of 95 surveyed law firms said they expected the retirement age of their partnership to rise, with knock-on effects for partner development and succession planning. The firm has warned that delays in retirement will put pressure on the recruitment, promotion and development of other lawyers as circulation through the upper echelons of the firm becomes sluggish. 'The danger firms have got is it is creating blockage at the top of the partnership, where they can't promote new partners as the older partner stay on,' said Smith & Williamson's director of financial services Mike Fosberry.
Changes to the high-earner tax threshold for pension contributions will be a key factor pushing up the retirement age in firms. From April 16, the tax-free threshold for pension contributions is set to gradually drop from the current £40,000 per year for people earning more than £150,000 per year in the United Kingdom, at a rate of £1 for every £2 earned over the £150,000 threshold. For people earning over £210,000 a year, the annual tax relief threshold will eventually be as low as £10,000. 'We are increasingly seeing partners retiring later as they haven't been in a position to make adequate pension provisions,' said Mr Fosberry, adding that the changes to take effect from April are likely to only further exacerbate the trend. To support lawyers at both ends of the career spectrum, firm managers will need to assist partners in making supplementary personal financial arrangements to help guarantee a comfortable retirement. Source: Law Society Gazette; Smith & Williamson