NFU Mutual Research Reveals Retirement Planning Gap in SME Sector

The latest research from NFU reveals a lack of retirement planning across the older age cohort of small biz owners;

Savvy millennials running small business are more likely to have taken out pensions to support their retirement than their gen X counterparts, new research suggests.

Half of 25 to 34-year-olds running small businesses have a pension or investments they believe will fully support their retirement, compared to just a quarter of 45 to 54-year-olds, according to the survey from commercial insurer NFU Mutual. Only 30% of 55 to 64-year-old small business owners – those with retirement most firmly in their mind – believe their pension will support life after work.

Young entrepreneurs setting out in business also look like they are getting their plans in early. More than nine in 10 (93%) SMEs or sole traders aged between 25 and 34 surveyed say they have a succession or retirement plan in place. On the flip side, almost a quarter of those between 55 and 64 in the same position admit they don’t have a plan in place.

With upcoming taxes and rising costs, money is clearly something on the minds of many of the UK’s small business owners and sole traders. More than one in five that were surveyed said one of the biggest challenges their business is currently facing is financial uncertainty.

Alarmingly, 15% of the UK’s small business owners or sole traders questioned said they have no succession or retirement plan in place, and just 39% across the country said they have a pension or investments they believe will fully support retirement.

The research comes after a government report on pensions highlighted a decline in the number of self-employed paying into pensions. Compared to 1998, when 48% of self-employed saved into a pension, now less than 20% do so, meaning over three million self-employed are potentially not saving in a tax-efficient way for their retirement.

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “The fact that millennials are more likely to invest in pensions and at an earlier age than previous generations is born in part from a recognition of the need to be self-reliant.

“The government encourage pension saving through tax incentives, for every £80 invested they will add £20, with those paying 40% or 45% tax able to reclaim additional tax relief. They can also be a very tax efficient way of taking profits from your own company.

“Pensions can play an important role in succession planning, providing an independent source of income from age 55, allowing the older generation to take less from the business as they reduce their involvement.”