Those that have seen me speak over the last year, will remember that I made a number of predictions about the UK at the end of 2009. So how did I do, and why did I make the predictions at all?

Taking the second point first, here is why I stick my neck on the line on these areas. Employee Benefits carry many attractions:

For employees:

• Financial security for employee and family
• Improved health and wellbeing
• Tax advantages
• Wholesale pricing

For employers:

• Compliance with legal duties
• Meeting moral duties
• Reduction in absence
• Keyperson protection
• Tax advantages
• Recruitment and Retention tool

Whilst these are all key areas, the principle reasons for the existence of employee benefits in the UK is the last one, they remain a powerful recruitment and retention tool. It therefore follows that the state of the UK economy, and indeed the employment market more specifically, are key to the continued success and innovation of employee benefits.

So what were my key predictions 12 months ago?

There were four principle points:

1) A hung parliament:

Before any other commentators that I am aware of (and certainly before the national media) predicted this, I suggested that the most likely result of the election would be a hung parliament. Those who remember me speaking on this subject will recall that I based this prediction on the history of electoral ‘swing’, rather than deep rooted political thinking. And the ‘swing’ element certainly proved to be the key in this.

The resultant hung parliament led to the eventual coalition. It should be mentioned that the possibility of Conservative/ Liberal alliance was not considered by anyone (including myself) prior to the actual result, and must have been a real surprise to the supporters of both. So, for my first prediction: 10/10.

2) Low Investment Returns:

I predicted that, given the huge share price returns in 2009, that this would largely level out. WRONG! As I write this, the FTSE has bubbled around the 6000 barrier for the first time since the real teeth of the financial crisis showed in 2008.

A large slice of my prediction on this point was directly linked to the hung parliament prediction. During the period around the election, the FTSE dropped as low as 4,800 (thus supporting my prediction), but as the coalition strengthened, the market has followed suit. So good news for shares (which is also good news for pension schemes of course).

Whilst shares have been unexpectedly buoyant, bank interest rates remain very low (with the bank base-rate still rooted at 0.5%, a historic low). Good for borrowers, but bad for savers. So investment returns have been patchy, and I can just about get away with claiming half right here: 5/10

3) Social Unrest:

Largely based on my expectation that whoever gained power in the election would immediately introduce cuts and austerity measures, I predicted social unrest. Whilst many such measures have been announced by the coalition, they have to a large extent mirrored the previous Labour administration approach of deferring the impact of such cuts. In both cases it is difficult to see any driver here, other than politics. Labour could not afford to alienate voters further before the election. The coalition needed time to establish itself and shore-up internal differences and/or voter unease at the situation. If you doubt me, think about one of the most controversial of those coalition measures: the abolition of Child Benefit for higher earners. Whilst this was deemed necessary and important, it does not actually take place until 2013, which rather suggests the urgency card has been overplayed here.

But eventually, and quite late in the year to be honest, the social unrest did arrive. In accordance with historical precedent, this was led by students (always the first to demonstrate on any issue). As you will be aware, some of the demonstrations got really nasty, but luckily the end of term intervened, and the hardened radical protesters went home for Christmas with the family, thus cooling the situation in the short term.

I was however expecting more unrest from the Unions than we have so far seen (for instance Spain and Portugal have suffered ‘national’ strikes of late), so that is something to watch out for in 2011. I therefore think I need to mark myself down a little here: 8/10

4) Rising Unemployment:

Wrong! Simple as that. It didn’t, and has not yet. But (and this is a significant caveat), once again this is as a direct result of successive governments delaying the impact of the austerity measures. That begins in earnest in 2011, so don’t assume we are out of the woods just yet here. 0/10

So, from a potential total of 40 points, I picked up 23. Not bad, but could do better.

I will be making similar predictions for 2011 on the blog nearer the New Year, and with a more certain political outlook (notwithstanding the Daily Telegraph’s efforts to unsettle the Coalition government at present), I would like to think my predictions might carry a little more conviction for next year.

Returning to the point of these predictions, where does 2010 leave employee benefits? Actually, in surprisingly good shape.

Although the coalition have attacked the tax breaks in pensions, the new proposals are very workable, and are less likely to alienate high earners than the original basis. The new pensions minister knows his stuff, and is proving quite adroit at bringing the pensions industry, employers and employees with him as significant change is made. The noises from NEST, which were originally quite confrontational, now appear to be softening. Cooperation between NEST and the existing pensions industry now appears to be the new game plan (which is very welcome for all). Even the Retail Distribution Review may now be reviewed, and any change here, however small, is likely to be welcomed by employers and the industry alike.

In the wider world of employee benefits, we have seen changes to some of the tax breaks associated with benefits (Childcare Vouchers and Bikes 4 Work being two of these). But other changes, such as increases to Insurance Premium Tax, have little or no impact on many traditional employee benefits (Healthcare being an exception here). Yes, the tax-breaks of employee benefits will continue to be assessed during these difficult years, but I am confident that the industry will once again prove surprisingly adaptable and durable. Making benefits more relevant, and more accessible, will become key drivers in the difficult years ahead, as will controlling cost.

Thanks for reading, and happy holidays.

Best regards

Steve