500,000 SME owners rely on their business to fund their retirement

More than half-a-million self-employed professionals are relying on their business to fund their retirement, with just one-third currently paying into a private pension scheme, according to new research from Aegon’s 2016 Retirement Readiness Report.

The study estimates 630,000 self-employed people in the UK look upon their business as their pension pot and plan to rely on the potential sale of their business to cover their overheads later in life.

Nearly two-thirds believe that only half or less of their retirement income will be made up of a private or former workplace pension scheme.

However, those self-employed who are making pension provisions appear to be more engaged than the general public, with more money set aside in their pension pots than the average employee.

Self-employed staff have £40,400 saved in their pensions on average; £5,200 more than the average across the rest of the employed population.

Additionally, self-employed professionals have greater savings ambitions when it comes to their annual retirement income, anticipating income of £45,700 compared to the UK average of £38,000.

Recent amendments to the state pension have benefitted the self-employed who reach retirement age on or after 6^th April 2016, who are now entitled to receive up to £155.65 a week, rather than the previous maximum basic state pension entitlement of £119.30 a week.

Steven Cameron, pensions director, Aegon, said: “Our research shows the self-employed have particular needs and aspirations when it comes to saving for retirement.

“There’s … a significant gap between saving behaviours and very ambitious expectations for retirement, with the self-employed expecting to not only retire earlier, but also receive more income in retirement than payroll employees.

“There are real risks in assuming that your business can fund you through retirement.”

Date published 3 Aug 2016 | Last updated 3 Aug 2016