When old age pensions were first introduced, life expectancy was far lower than it is today and back then most people of retirement age had approximately five years to savour the meagre entitlements available, before dying aged, on average, 52.
For retirees today the years that follow the end of a working life are not necessarily counted in single digits but often decades and for many retirement is a time of new opportunities when a lifetime of prudence and investment in pension pots pays off.
With the advent of new pension freedoms enabling savers to draw down lump sums from their pensions without large tax penalties, it just may be possible that a generation of ‘silver entrepreneurs’ to emerge.
According to some statistics a tenth of retirees are now considering taking the plunge and setting up small businesses with their pension funds and, on average, the size of the pot they can draw from is £550,000.
A lifetime of expertise
For some, ending a career at 55 or 65 has meant abandoning a lifetime of knowledge and expertise acquired in what could be considered a valuable and important field so with new opportunities to ‘use my pension to invest in a business’ opening to entrepreneurial pensioners, these skills don’t necessarily have to go to waste.
It could be that once you retire you can establish the type of small business that you dreamed of and which may not even be related to your working life!
Some retirees, having been used to a busy life in business have found that a sedate retirement can be frustrating and there is evidence to show that just ‘giving up’ on retiring can be bad for both physical and mental health.
The prospect of cashing in up to a quarter of an entire pension pot in one go to set up a small business can be daunting. Any investment is a risk and, even if you think the business idea is sound and likely to work, taking a risk when you are 35 is different from taking one when you are 65.
You not gamble more than you can afford to lose and for some people they can‘t really afford to lose any pension at all so seeking professional business and investment advice is essential.
Most local authorities run free business courses and they are always worth investing your time in but getting expert independent financial advice on your new business is also important.
Making the business as tax efficient as possible, ensuring that you have the right kinds of personal, professional and/or public liability insurance at the right price are the types of issues that a trained advisor can give you some guidance on.