Olderpreneurs access almost £1.5bn from pension pots to fund new ventures since the introduction of Pension Freedoms…
The UK’s two million small business owners aged over 50 (termed Olderpreneurs) could access more than £250bn from their pension pots to fund growth in their businesses, according to analysis out today (4th April 2019).
Just before the fourth anniversary of Pension Freedoms (5th April 2019), the analysis by Clifton Asset Management also shows:
- To April 2019, Olderpreneurs have used Pension Freedoms to access almost £1.5bn (£1.45bn) from their personal pension pots to fund new ventures
- ONS data published in March 2019 showed that Olderpreneurs have set up more businesses than any other age demographic in the last decade – rising by over 700,000 from 1.47million in September 2008 to almost 2.2million in December 2018.
- Further analysis of ONS data published on 28th March 2019 by Clifton Asset Management, also finds that although 30% of Olderpreneurs have no personal pension wealth, the remaining 70% (over 1.5million) collectively have access to over £250bn in small business finance from their personal pension pots.
From the age of 55 Olderpreneurs can use Pension Freedoms to access funds from their pension pots, but Clifton Asset Management points out that while using their tax free allowance to fund a business may be taking the right strategic decision, for larger pension investments, they should seek advice, and consider Pension-led funding (PLF), which has funded over 2,500 businesses. Seeking advice is particularly important as recent research found £3.2bn has been accessed by pension holders as a lump sum from pension pots without financial advice since the introduction of Pension Freedoms.
Chairman and Founder of Clifton Asset Management and Pensionledfunding.com, Adam Tavener said: “Study after study has shown that Olderpreneurs run more successful businesses, generate greater profits and create more jobs than their younger counterparts. But many have done this with one arm tied behind their backs because of a difficulty to fund growth due to strict lending criteria penalising older business owners or they have the majority of their wealth tied up in property.”
Adam Tavener continued:
“There is a real opportunity here to invest pension wealth in successful businesses with more than £250billion sitting in the pots of businesses owners aged over 50. Done properly, Pension-led funding provides older entrepreneurs with significant amounts of growth capital by strategically redeploying their pension savings. The benefits of this approach to the UK economy are evident.”
A report published by The Forum of Private Business and Clifton Asset Management in 2017, found that over a third (38%) of Forum business owners would consider using their pensions as a business funding source. That same year, the Institute of Directors (IoD) called on the government to make it easier for business owners to invest their pension into their own business.
Ian Cass, Managing Director of the Forum of Private Business said:
“The Forum of Private Business has seen growth in the number of older members starting new businesses, some as individual consultants, but also a significant number are growing their business from a one-person start-up to small businesses employing 5-19 employees.
These entrepreneurs bring a wealth of knowledge and expertise to their new business, and if they receive the appropriate support and finance to develop and grow, they are a significant contributor to the UK economy.”
The over 50s run more successful business
Statistics show that older entrepreneurs are more successful than those starting out younger.
- According to a survey by Age UK, the charity for older people, more than 70 per cent of businesses started by people in their 50s survive for at least five years compared to only 28 per cent of those started by younger people.
- According to research from the Cranfield School of Management, businesses run by owner-managers over 50 drive up revenues at their companies three-and-a-half times faster than GDP growth: 11.5pc compared with 3.1pc. Older entrepreneurs also create jobs at a rate more than seven times faster than the UK economic average.
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Notes to Editors:
- There were almost 2.2million (2.19million) self-employed workers over the age of 50 (Olderpreneurs) in the UK in December 2018. On 28th March 2019, The Office of National Statistics (ONS) published the private pension wealth of small business owners aged over 50 in Britain. The ONS data found that although 30% of Olderpreneurs have no personal pension wealth, the remaining 70% of self-employed (aged 50 and above) have a combined private pension pot of over £250bn (£257.8bn) – see chart below.
- £1.45billion has been released from Olderpreneur pension pots to fund new ventures – AXA Wealth’s later-life entrepreneur’s study in April 2015 found that more than 500,000 over-50s were considering taking advantage of pension freedoms to help start a new business. Almost half (250,000) said they would use their 25% tax-free lump sum to fund their start-up. Two separate studies (ONS and 2014 Global Entrepreneurship Monitor) have shown that between 80,000-120,000 over 50’s start-up a new business in the UK each year. As AXA Wealth found, 50 per cent intend to use their 25 per cent tax-free lump sum to fund their start-up, and the average personal pension is £29,000, Clifton Asset Management estimates that in the first year following pension freedoms, entrepreneurs over 50 released £362million (50,000 x £7,250 = £362million) to fund their new venture, and therefore almost £1.5billion (£1.45billion) has been accessed since Pensions Freedoms was introduced from April 2015 to April 2019. This is a highly conservative figure as many entrepreneurs will access more than their cash free lump sum (25 per cent) entitlement. For instance, entrepreneurs using Pension-led funding, on average, access £70,000 from their pension to fund their business.
- Office of National Statistics data – September 2008, September 2018, and December 2018 – see tables below
- Saga Research, 15th March 2019 – https://www.ftadviser.com/pensions/2019/03/15/more-than-3-2bn-taken-out-of-pensions-without-advice/
- The report published by The Forum of Private Business and Clifton Asset Management in 2017 – included an in-depth online survey of around 200 SME business owners who were members of The Forum. Members were surveyed during February 2017. Two-thirds of members/business owners (64 per cent) were aged over 50, and almost three quarters (70 per cent) were running businesses with an annual turnover less than £1million.
 Clifton Asset Management analysis based on Office of National Statistics data – see notes to editor
 Clifton Asset Management analysis – see notes to editor
 Office of National Statistics data December 2018 – see notes to editor
 Saga Research, 15th March 2019 – see notes to editors