Is your business your pension?

Business People Standing Behind each other with arms crossed

Where does your business fit in your retirement plans – is your business your pension? Are you planning to either sell or take an income from your company to provide funds in later life? Without careful planning, you could find at the end of your working life that it just isn’t a viable option. So, what do you need to consider?


Don’t be hyper-focused

There is more than one way to skin a cat, as someone once said. Just because you decided at some point in your life you were going to sell the business to fund your retirement, doesn’t mean it’s your only option now.

Keep an open mind and consider all the options available, you may still end up with the same conclusion, but at least you would have done your due diligence and know it’s the right decision.


Can the business run without you?

It is important to potential buyers, shareholders and other partners that they feel confident the business can run effectively without you at the helm. You need to have an agreement with all business partners on the way forward and ensure that there is good leadership in place.

Consider slowly stepping back from an active role over time, so your colleagues and team members get used to taking on more responsibility or dealing with someone else. This will mean that there is less concern when you finally retire about the running of the business.


Selling your company

If you choose to sell your business for a profit, then it takes careful planning to maximise your company’s capabilities as much as possible before looking for the right buyer. It is a competitive market out there and finding a potential buyer can take time. You need to ensure your retirement plan has these timescales built in.

It is crucial to have the appropriate professional financial support in place and be aware of what the tax implications are. An experienced Life Centred Planner is an excellent place to start, as they will be able to guide you through the process, identify other professionals you will need help from such as legal advice and help you plan for your future wealth and security.


Taking an income from the business

Maybe you plan to retire but still continue earning an income from the company. There are many ways to do this. Are you going to remain a shareholder and thus receive dividends? Or perhaps you want to be a silent partner that receives a small income or share of the profits? Will you also get yearly bonuses or maybe as the owner you will just continue to pay yourself a salary without actually running the business day to day.

Whatever your choice you need to understand what it means to your business and what the tax impact is personally and corporately. Consider seeking advice from a Life Centred Planner about the best way to structure your finances and maintain a steady income during retirement.


Company pension

Does your business provide you with a company pension and it’s that which is going to facilitate a comfortable retirement? This is obviously the option that’s closest to a traditional retirement route.

However, as the business owner, you need to consider what that means to your company. What role will you play after you retire? Who will now run the business and what limits are there to how you can impact decisions made?

You also need to be consistently reviewing your pension provision now and how it fits into your retirement plans to allow time to make any necessary amendments. No-one wants to get to retirement age to find out that their company pension is not going to be sufficient.

A professional Life Centred Planner works with you to understand your goals, what pension provision you have in place alongside other assets and whether your current resources can facilitate the lifestyle you want. They can advise on whether you need to increase payments into your pension, what the tax benefits may be and how to structure your finances for optimum success.


Growth strategy

If you are not planning to sell your business and its continued success is crucial to providing you with an income, then it’s also essential to ensure that you have an effective growth strategy. Look at where you see the business in 5, 10 or even 20 years. Set out a clear plan for achieving those goals and what that means in a practical and financial sense.

Do a full analysis of the business and consider where you need to invest to achieve growth, alongside any profitable gain. What are the challenges ahead and how will you overcome them to maintain your place in the market and achieve longevity?


It should start with you

Retirement planning is not about pensions or products. It’s about what kind of lifestyle you want when you retire. What does it look like? Are you going on holiday 4 times a year, spending time with the grandchildren or downsizing to an apartment by the river?

Once you know what your life goals are, then you can start looking at what your costs will be and how they could potentially be affected by the cost of living and inflation. Working with a Life Centred Planner, they can help you forecast your plans and what your outgoings are likely to be as you age.

The next stage is to review your financial resources to see how they can facilitate the lifestyle you wish to have. Your business is one resource available to you, but it should not be considered in isolation – what other assets do you own that could work alongside any income from your company?

Do you have other pensions, including your state pension, investments, property, or savings? A Life Centred Planner can work through the options and scenarios with you to find the best solution for your circumstances. They can ensure that you have thought through every aspect from financial protection to any potential long-term care costs if you fall into ill health. Your planner will also assist you in ensuring that your estate planning reflects your retirement plans. It is a holistic approach we take so that you can create a brighter future for yourself and your family in retirement. Contact us for a free chat today to see how we can help.


Further information

If you found this information useful you may also want to check out the following:

Building a succession plan for success

Considering selling your buy-to-let property?

How can your company provide you with financial security?

MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, taxation, debt management, savings and investments, lifestyle planning and much more.

Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.