Because the Government wants people to save for their retirement, pensions come with significant tax breaks. These are fairly well known for individuals: pension contributions up to your annual allowance (as much as you earn each year, usually up to £40,000) receive tax relief of 20-45% depending on how much Income Tax you pay. But there are big advantages for business owners too:
Business owners are often much more comfortable investing in their own business than trusting others to invest on their behalf. They know their company and industry inside out so on the face of it, this makes sense. But as with any investment, it is rarely sensible to put all your eggs in one basket.
You never really know what is going to happen with your business in the future. As an example, the market may go against you. If it does, and you don’t have a pension or other investments, you’ll compromise your future lifestyle. And what will happen if you get ill in the future? You may need to sell your business earlier than expected and give up work. You may also have to sell your business for less than expected. With a pension or other forms of retirement saving, you would be less vulnerable.
We speak to many business owners who have been put off pensions by a bad experience – they’ve paid high charges and ended up with mediocre returns. That’s where financial advice can more than pay for itself. A good financial planner with experience of working with business owners can work with you to construct a pension that helps you make the most of the tax benefits and investment opportunities while also taking into account your individual attitude to investment risk.
A good financial planner can also work with you on your exit plan, helping you understand when you can realistically retire. We use cashflow modelling to create a visual illustration of what your future finances could look like. As an example, we can take into account the proceeds from your business sale as well as your other assets and expenditure to forecast your future income. And we can help transfer business wealth into personal wealth, making sure your assets are structured in the most tax-efficient way.
We have a nationwide team of financial planners at Tilney who are experienced at helping business owners. Working alongside any other business advisers you have, we can help you make the most of finances.
Why not book an initial consultation to find out how we can help you? It won’t cost you anything and there is no obligation to take any of our services.