Scottish farmers are not retiring types, say Mutual

While the vast majority of farmers in Scotland propose to continue working well beyond normal retirement age, only a small proportion plan on taking income from the business in later life, a survey has revealed.

Sean McCann of NFU Mutual
Sean McCann of NFU Mutual

Research commissioned by NFU Mutual showed that most farmers planned to continue to be involved on the farm past retirement age, but some conceded that they might do less than before, help out at harvest and lambing or concentrate on helping with the paperwork.

The survey found that half of Scottish farmers plan to do the same work they currently do but less intensely, while 41 per cent planned to help out at busy times.

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Around a quarter (23 per cent) proposed to help out with fencing and other odd jobs, but only 15 per cent expect to do nothing.

Despite this, just 23 per cent planned to continue taking income from the farm.

Instead, many older farmers pinned their hopes to income from pensions, with nearly three-quarters (69 per cent) of farmers in Scotland planning to use a private pension for income in later life.

So far there has been no formal indication of a retirement scheme for Scottish farmers similar to that proposed south of the Border, which would allow those in the industry to take a lump sum based on future support payments.

But the survey of 688 farms across England, Scotland and Northern Ireland carried out by the University of Exeter for the Mutual found that private pensions were the main source of income looked to in retirement age.

A quarter of Scottish farmers (25 per cent) also plan to use income from letting property in later life and 41 per cent plan to use other income from other investments, with a large proportion looking to more than one source of retirement income.

“Pensions provide an independent source of income for the older generation, giving them the freedom to take less from the farm,” said Sean McCann, Chartered Financial Planner at NFU Mutual.

He said this was particularly important when two and sometimes three generations relied on the farm for their livelihood.

“Because of the range of options when it comes to taking money from pensions, it’s important to take advice to ensure you don’t pay more tax than you need to.”

He said that pensions were a key source of income for farming families, and they were also the most likely to spark the need for a financial adviser, adding that 85 per cent of NFU Mutual customers indicated they would seek professional help for pensions.

But for those approaching penion age he warned of common pension mistakes:

“Taking more than your 25 per cent tax free cash entitlement from your pension can trigger an Income Tax bill,” he warned.

And he added that while money in pensions was normally free from Inheritance tax, cash in the bank was not.

“And taking more than your 25 per cent tax free cash entitlement reduces the amount that you (and your employer) can pay into pension from up to £40,000 each tax year, down to £4,000.”

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