Small business owners fear they will outlive their retirement funds

Many small business owners expect to retire beyond 70 and have a pension pot of under £500,000

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45% of the UK’s small business owners are expecting to outlive their retirement funds, according to the Pensions and Small Business – Ticking Time Bomb or Hidden Treasure report from the Forum of Private Business and Clifton Asset Management.

The survey of 1,200 small business decision makers found that 42% expect to retire at or after 70 and 50% think they will have a pension pot of less than £500,000 to fund their retirement – a sum that would only pay out £25,000 per year.

63% of those surveyed said they believe their homes will help fund their retirement, despite prices-to-income ratio being close to an all-time high. At around £578,000 – more than double the national average – just London house prices are thought to be buoyant.

The report also found that Pension-led funding is still viewed with concern amongst business owners: while 30% had accessed business funding in the past and 59% think they will sell their business to fund their retirement, only 38% said they would consider using their pension now as a source of finance.

Ian Cass, of The Forum of Private Business, said: “With many pension pots not providing sufficient income for retirement, there’s a perception of ‘irrelevance’ or dead money by many pension-owning small businesses.

“Even though they don’t currently deliver adequate returns for many, we would encourage them to consider the risks and rewards of leveraging them in a smarter way in order to develop the value of their businesses.”

Adam Tavener, founder of Clifton Asset Management, added: “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 small business owners to make the most of their pensions and fulfil their business and retirement expectations.”

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