Almost half (46 per cent) of UK business owners - or 1.3 million people - have no private pension savings to support them in retirement, according to new independent research from Prudential.
Of those who have failed to make any private pension provision, more
than half (54 per cent) said this was because they simply could not
afford to set money aside. Nearly one in five (18 per cent) say they
don’t have a pension because they will never retire, and 9 per cent
claim they have sufficient funds in a company pension from previous
Nearly one third (29 per cent) of business owners, or 792,000 people,
say they will be entirely reliant on the State Pension when they come to
retire, compared with just 16 per cent of people across all employment
types retiring this year in the UK.
Other self-employed workers will supplement their retirement incomes
with money from a mix of alternative sources: 48 per cent will draw on
other savings and investments, 25 per cent will use equity from their
properties, 25 per cent plan to use their partners' pensions, and 19 per cent plan to use funds from the eventual sale of their businesses.
Prudential asked those business owners who don't have a personal pension
whether they plan to start one in the future and the majority of
respondents (63 per cent) said no. Only 13 per cent said they were
planning to start a pension and just under a quarter (24 per cent) were
Stan Russell, retirement expert at Prudential, said: "It's sometimes
hard for self-employed workers to distinguish between their business and
personal finances. Often, investing in the business takes priority over
saving for retirement - an issue that is particularly prevalent now,
given the tough economic conditions facing UK businesses.
"Unfortunately, the long-term implications of not saving for retirement
are that many retirees will have a real income shock and reduced living
standards when they finally retire. And while a number of business
owners say they don't need a pension because they'll never stop working,
this optimistic approach won't always be realistic - for example
because of health issues later in life.
"Although some business owners plan to supplement their retirement
incomes with alternative sources of finances, a large proportion will be
entirely reliant upon the State Pension - which should actually be a
safety net, not a default source of income."
Saving into a pension has become a lower priority for those business
owners who do have some dedicated retirement savings. The survey found
that more than a quarter (27 per cent) of entrepreneurs with pension
savings had put their personal contributions on hold since the start of
the economic downturn.