Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Farmers need to step-up their human capital risk planning

Farmers need to step-up their human capital risk planning

Farmers aren’t paying enough attention to human capital risk planning, says Hastings-based Crowe Horwath Risk Adviser Tim Ewen.

Although the intellectual property underpinning the farm’s wealth was often tied up with the owner, too little focus was placed on the “what-if?” factor, he said. In the event of a farmer becoming either temporarily or totally disabled, or passing away, planning was essential to make sure the farm business could continue to provide for family members.

“Farms rely on key people to make the business work,” said Mr Ewen. “Farmers need to take account of the human capital risk and ensure they have appropriate planning in place so the right money goes to the right people at the right time.”

Crowe Horwath cited a recent Financial Services Council survey, which found only 20 per cent of New Zealanders have income protection insurance, compared with 95 per cent who have their car and home covered. It also noted a recent Kelloggs Rural Leadership research paper by Michelle Wilson, which found that while 80 per cent of farm widows have life insurance, in hindsight only 20 per cent found it was sufficient. Meanwhile, 40 per cent said they should have had enough insurance to provide for a farm manager for 12 months. In addition, insurers typically pay out much less than is claimed.

Mr Ewen said farm owners should also be aware there could be advantages in altering their ACC structure.

“ACC will only pay 80 per cent of your pre-disability income, less tax,” he said. “And farm incomes can fluctuate markedly. In some instances the books may show little if any profit after all expenses are allocated, so it makes sense to lock-in an agreed value cover that will also cover the farmer for sickness as well as accident, regardless of how farm revenue changes.”

A related key issue is succession. Even though more than 70 per cent of farmers want to sell to their children, only 10 per cent have a succession plan in place, and access to capital is a major barrier, compounded by the high value of farms today.

Mr Ewen recommended that farmers develop a comprehensive succession plan, specifying buy-sell agreements, share purchase funding options and shareholder employment contracts. The plan should include funding for off-farm retirement needs and contingencies to cope with a major disability or premature death.

“Regular reviews are important because circumstances change,” said Mr Ewen. “They’re not a fun conversation to have, but they certainly give peace-of-mind and clarity to those involved”.

Crowe Horwath (NZ) Limited is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity.

ENDS

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 


Government: David McLean Appointed As KiwiRail Chair

David McLean has been appointed as Chair of KiwiRail Holdings Ltd, the Minister for State Owned Enterprises Dr David Clark and Minister of Finance Grant Robertson announced today... More>>


Dairy NZ: ‘More Milk From Fewer Cows’ Trend Continues In A Record Year
Vodafone says it has 10,000 customers using its Wi-Fi Calling service. It took less than three months to reach that milestone; the service began operating in September... More>>

Statistics: Consents Remain At Record Levels
There were 47,715 new homes consented in the year ended October 2021, up 26 percent compared with the year ended October 2020, Stats NZ said today. "The year ended October 2021 marks another record for the annual number of new homes consented,” construction statistics manager Michael Heslop said... More>>



Fonterra: Lifts Forecast Farmgate Milk Price Range And Revises Earnings Guidance At First Quarter Update

Fonterra Co-operative Group today lifted its 2021/22 forecast Farmgate Milk Price range, reported a solid start to the 2022 financial year and revised its earnings guidance... More>>


Canterbury Museum: New Research - Bald Haast's Eagle Feasted On Moa Guts

New Zealand’s extinct Haast’s Eagle (Hieraaetus moorei), the largest known eagle, gulped down viscera like a vulture and may even have been bald, new research suggests... More>>

ABC Business Sales: Demand High For Covid-proof Businesses
Despite the continuing challenges facing businesses in this Covid environment, right now there are more buyers looking for a small-medium sized business than there are sellers in the market... More>>


PriceSpy: Producer Prices Increase
New Black Friday and Covid-19 Report* released by PriceSpy says people’s fear of stepping inside physical shops during big sales events like Black Friday has risen since last year; Kiwis are still planning to shop, but more than ever will do it online this year... More>>