The research shows that one in ten of the UK’s over 55s who are due to retire in the next 18 months are considering drawing down on their pension pots to start a small business or go into consultancy. This ‘later-life entrepreneurs’ trend could see over half a million over 55 year olds shun retirement in favour of starting up their own business venture.
The average value of a pension pot of those asked was found to be £550,000, and of those considering withdrawing money to invest in a new business, almost half intend to use their 25 per cent tax-free lump sum to fund their start-up.
Over a third planning on starting a new business cited realising a lifelong dream to be a business owner as the top motivation factor, whilst a quarter are hoping to be able to monetise a hobby with their new unlocked investment pot.
The research also reveals how the pension reforms will vary in impact upon the UK’s different regional economies. The South West is expected to most likely experience a mini boom in teashops and restaurants with 22 separate new establishments being considered, while the Midlands could see a resurgence in manufacturing, with 25 new production facilities being considered in light of newly invested start-up capital.
Adrian Lowcock, head of investing at AXA Wealth who commissioned the research from Trends Research , comments; “We’re seeing a revolution when it comes to retirement spending. The widespread concern that pensioners will blow their whole pension on a supercar feels exaggerated. Instead we are seeing a diverse approach; with the over 55s taking to the freedom and opportunities created by the pension reforms – in this case fuelling a whole new generation of later-life entrepreneurs.”
In addition to creating a start-up business or going into consultancy, almost nine per cent are thinking about investing in a franchise using some of their pension pot.
Lowcock added “But with more choice and freedom inevitably comes more risk, and although small businesses are the backbone of Britain, most fail to make a profit and end up losing all its investors’ money. For the majority of people it is not an appropriate use of their pension pot. You wouldn’t want to risk your hard-earned pension money, so anyone considering investing in a small business needs to consider what the loss of their investment and retirement income, would have on the quality of their retirement.”
John Jones, 59, is one such example. As a retired Northamptonshire Police Superintendent like many retired officers he made the natural step of starting his own security company. CrimeDeter was created in 2012 with the aim of reducing crime affecting the business community across the UK. Initially Jones started off with the intention of offering consultancy services to provide advice about how to reduce crime, however that grew quite quickly into the provision of investigations, surveillance, training and latterly forensic marking.
It is the forensic marking aspect of the business that made the ever expanding businessman realise that there was a real and urgent need to expand the company to ensure that he and CrimeDeter could compete with an already established market.
In order that CrimeDeter was able to securing a potentially highly lucrative and ground breaking contract with a major UK poultry producer Jones made the decision that he needed additional investment to fund trials of a revolutionary forensic marking system to mark animals entering the human food chain.
Following on from the recent horsemeat scandal and to create greater transparency in the meat industry is increased traceability as this provides both retailers and consumers with reassurance that the meat they are eating has been produced ethically and humanely.
Speaking about his move Jones said: “the fact that animals could be marked with a unique and invisible forensic code will act as a deterrent to would be thieves, which gives reassurance that the animals have not been ill treated, theft of all types of animals within the agriculture industry is a real threat at this time.”
Jones was keen to find the additional finance himself: “As soon as I can after April I am going to take out from my own pension pot the £200,000 I need to finance the CrimeDeter element of the product testing.”
It is Jones’ intention to expand from a business with a turnover just over £300,000 employing only a handful of staff across the country to a company which provides him with the ability to take a sensible monthly wage, employ additional staff and achieve a projected turnover in year two of just under £1M, year three of £1.5M and thereafter continued growth for the benefit of all staff and my family.
Asked why he had waited to make this move until April he said that after a short meeting with his bank manager it was clear that he wouldn’t have been able to borrow the £200,000 he needed and with it being a totally unproven idea he couldn’t get external investment. ‘When the changes were announced in the 2014 budget they were the golden ticket I needed so have bided my time and spent a great deal of time planning the expansion of CrimeDeter.”
