Most business owners have a plan for growth. Very few have a plan for the day they want to stop.
According to Which?, people who have spent most of their working life self-employed are three times more likely not to have a private pension. Three times. The gap between employed workers and business owners on this is not small, and the consequences arrive late, when there’s little time to fix them.
Why it keeps getting pushed back
Two things get in the way. The first is fluctuating income. When earnings vary month to month, long-term saving is easy to deprioritise. Which? found that four in ten self-employed workers cite this as their biggest barrier to saving for retirement.
The second is the belief that the business itself will be enough. Sell it at the right time, for the right price, to the right buyer. It’s a reasonable plan. It’s also a plan with a lot of things that have to go right.
The right buyer may never appear. Ill health may force an earlier exit than you planned. Markets move. Circumstances change. A pension doesn’t replace the business as a retirement strategy, but it means that if the business plan doesn’t land as you hoped, you have something to rely on.
3 practical reasons to open a pension now
1. It’s a safety net that sits outside the business
Your business and your retirement shouldn’t be the same thing. A pension keeps some of your financial future separate from the fortunes of the company. That separation matters more than most business owners realise, until the moment they need it.
Note that you can’t access pension savings until 55, rising to 57 in 2028. That’s a reason to think about your pension alongside other savings, not instead of them.
2. It’s one of the most tax-efficient things you can do
Pension contributions attract tax relief at your Income Tax rate. Basic-rate relief is added to your pot by your pension provider. Higher and additional-rate taxpayers can claim the full entitlement through Self Assessment. Returns on investments held inside a pension are not liable for Capital Gains Tax.
The government tops up what you put in, and the growth on it is sheltered from tax. There are few better deals available to a business owner.
3. Contributions may be an allowable business expense
In some cases, pension contributions can be treated as an allowable business expense, reducing your taxable profit and your overall tax bill. Saving for retirement and reducing your tax liability at the same time is not a bad outcome.
The question worth asking now
What does retirement look like if the business sells for half what you hoped? What if it doesn’t sell at all? A cashflow model makes those questions answerable before they become urgent. It can show you what you’d need to sell the business for to fund the life you want, how much pension contribution would give you a reliable base income, and what happens if the exit takes longer than planned.
The business owners who retire well aren’t the ones who worked hardest. They’re the ones who planned clearly. Living well after the business means making decisions now, while there’s still time to make them count.
If you’d like to talk through your retirement options, please get in touch.
This article is for general information only and does not constitute advice. The information is aimed at individuals only. All information is correct at the time of writing and is subject to change. A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. The Financial Conduct Authority does not regulate cashflow modelling.
