Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 2011 | Pensions and Small Business – Ticking Time Bomb or Hidden Treasure? Of serious consideration should be Pension-led funding. T his form of finance is aimed specifically at business owners and directors who, in order to make it commercially viable, have accumulated pension funds greater than £50,000 and want to support their own business. They don’t need to be over 55 (unlike withdrawals made under the pensions freedom regulation), and should there be more than one owner director in the same firm, the pension funds can be amalgamated to invest in the business. Unfortunately, olderpreneurs have hit a quandary based on their perceptions of risk; lack of understanding of the options available; and their belief that their pension pot is ring fenced and unavailable to support the wider business ambitions. While the majority of business owners suggested their business needed funding, only 38 per cent (Forum) of these would consider using their pension – despite many admitting their pension pots are potentially insufficient to completely fund their later life. This issue of a lack of critical mass in their pension pots was again borne out in our research. A third believed their pension was “too small” to fund a business. With business owners struggling to take a holistic view of their assets, or setting a proactive strategy to ease their financial concerns, where is the advisory community in helping them take an informed view? “More understanding around the flexibility offered by pension freedom is needed, particularly by those with business interests,” says Adam Tavener. And he would like to see the pensions “ecosystem” stepping up. “There’s a lack of education being proffered by the advisory community, and a lack of innovation among financial services providers. A knowledge-based approach is essential to drive good decisions for making the most of your pension.” While 71 per cent of business owners (Forum) 25% 38% Business owners that needed business funding, and would consider using their pension. YOUGOV FORUM 6. AXA Wealth’s later-life entrepreneurs study in April 2015 found that more than 500,000 over-50s were considering taking advantage of pension freedoms to help start a new business. Almost half (250,000) said they would use their 25% tax-free lump sum to fund their start-up.With over 100,000 over 50s starting up in business each year, and with half (AXA study) looking to cash in their 25% lump sum to start a business (average pension pot £29,000): £7,250 x 50,000 = £362million per year (£724million since the start of Pension Freedoms in April 2015). This is a conservative figure based on only tax free lump sums in an average pension, and for only start-ups, not established businesses – which are a much larger proportion of the SME community in the UK. Clifton therefore estimates that this would now be over £1billion for both start-ups and established businesses.