Turning to pension savings to fund start-ups

Entrepreneurs over the age of 55 who choose to start their own business may not have the necessary funds to get their idea off the ground. 

According to the Institute of Directors (IoD), older entrepreneurs should be allowed to fund a business from their pension pots without incurring a tax charge.

Pension freedoms were introduced in 2015 to give over-55s the option to access their retirement savings by withdrawing a 25% tax-free lump sum from their pension pot.

However, the IoD suggests older entrepreneurs should be allowed to access a further 10% of their savings if they want to use the funds to start their own business in the same tax year.

Lady Barbara Judge, chairwoman of the IoD, said:

"People in their 60s now are on the front line of the shifting boundaries between work and retirement.

"The government should consider introducing tax incentives to encourage people to pursue their ideas and invest in training, so they can continue to have fulfilling working lives beyond the age expected by previous generations."

Funding options 

There are several funding options available to encourage entrepreneurs to set up their own business, whatever stage you’re at in life.

Some options available to you are:

Short-term loans

These are business loans based over a pre-agreed period of time and set to various interest rates. 

Due to interest charged, this option is fairly expensive compared to others out there and requires some security, such as extra money aside if things don’t work out as you hoped.

Business grants

The government is keen to help start-ups and there are more than 200 grants available to help lower your costs and grow your business. 

Visit the government’s Business Support Finder to find the right option for you. 

Crowdfunding

This alternative option provides a platform to raise finance from members of the public to reach a target value. 

If this is met, the owner receives the money with investors taking a small share in the business.

Things to consider

It’s important to know how much funding you need and why. Ask yourself, what are your business objectives and goals?

Whatever stage your business is at, if your goals are unrealistic then it may prove difficult to secure the finance you want.

Before you attempt to source funding, ask yourself the following:

  • what is your business idea?
  • what do you need finance for?
  • what are the costs and benefits?

We can advise on funding your business.