Entrepreneurs shun pension plans
According to Prudential, 40% of UK business owners surveyed said that they will never stop working while 27% say that investing money into their business is more important than putting savings into a pension pot.
The study, which questioned self-employed workers about their financial preparations for retirement, also found that 23 % said they choose to invest in their companies over any other form of personal saving.
19% said that their business is their pension fund, and therefore it makes sense to invest directly into it.
Stan Russell, retirement expert at Prudential, said: “It’s easy to see why many self-employed workers prioritise investing in their businesses over saving into pensions when times are tough.
“The pay-off is much more immediate and the consequences of not saving for retirement can often feel quite distant. But it is a risky approach that could leave many business owners in financial difficulty later in life.”
The study revealed that almost half of UK business owners surveyed have no private pension savings to support them in retirement.
Of these pensionless entrepreneurs, nearly one in five have shunned saving for retirement because they are unlikely ever to quit work.
While some will draw upon other sources of finance when they stop working, almost a third will be entirely reliant upon the State Pension. This compares with just 16 per cent of people across all employment types retiring this year in the UK.
Russell continued: “A very high proportion of self-employed workers say they don’t have any plans to retire.
“In many cases, working beyond the normal age of retirement is an excellent way of securing additional income and boosting retirement savings.
“As people get older, however, their health often declines along with their ability to keep working. Retirement could therefore become a necessity, as opposed to a lifestyle choice.”
Of those business owners who do have pensions, 27 per cent took the decision to stop making contributions during the economic downturn because business was slow.
Only eight per cent of these self-employed workers have since restarted their contributions, while 19 per cent admit that their contributions are still on hold.
Russell added: “Saving for retirement – as much as possible, from as early as possible – is important to help maintain a good standard of living after stopping work.
“Business owners who have not made these provisions should seek advice from a financial adviser without delay.”