Retiring from work was traditionally something that people expected to do around the age of 65, when they would say goodbye to their colleagues and head off to spend more time with their family, on the golf course, or travelling with the pension pot they had built up over many years.
But life isn’t as predictable anymore with more people realising they aren’t ready to give up the challenge of work just yet and instead deciding to set-up their own business.
Bob Hair, wealth planning director and head of Edinburgh office for Cazenove Capital, a long-established wealth management firm, has seen the development of this trend and has advised clients on how to make such activities in retirement work for them.
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Mr Hair explains: “A trend is that people aren’t just turning up at work on a particular date, handing in their mobile phone and laptop and saying ‘that’s me retired now’. More people are using their pension funds to give them the freedom and flexibility to set-up on their own.
“Someone might use their self-invested personal pension (SIPP) to buy a retail premise or pub, for example. The age of 65 is actually now seen as relatively young with people generally living longer.
“Some people work beyond retirement age because they simply love what they do, while others may well turn their hobby into work. And there are frustrated entrepreneurs who have always wanted to set something up and now have the time and financial freedom to go for it.”
But people should think carefully about how they set-up their post retirement business and pay close attention to such things as how much tax they will be paying, VAT and remember that there is no reason to pay National Insurance after state retirement age.
“Getting the structure of the business right from day one is very important. People might want to think carefully about the participants in their business,” says Mr Hair. “If you want to use the business to support children now and, in the future, you might set up a family company where the benefits or profits are shared. It really depends on the individual circumstances so it’s important to get good advice.”
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As with anyone setting up a business, those launching a venture in retirement should think about their exit strategy and succession planning.
Succession planning is also a concern for those who have run a business for many years and continue to do so after retirement age. In that case, families should think carefully about how they structure the business to suit multiple generations. Considerations should include income, capital and voting rights of different generations of the family.
On a final note, Mr Hair points out that just because someone has reached a certain age they should not automatically stop putting money into pensions. “You can set-up your business, take a small income and use the company to top-up your pension.”
Retirement might throw up more financial challenges and considerations than in the past but, without doubt, there are also many more options and opportunities to take advantage of.