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  • October 2012
10

Half of UK business owners 'have no pension savings'

Open-access content Wednesday 3rd October 2012 — updated 5.13pm, Wednesday 29th April 2020

Almost half of UK business owners have no private pension savings to support them in retirement, according to research published by Prudential today.

A survey carried out on the firm's behalf found that 46% of business owners had no pension savings. More than half (54%) of these said this was because they could not afford to set money aside, while 18% said it was because they would never retire. A further 9% claimed they had sufficient funds in a company pension from previous employment.

Nearly one in three (29%) business owners told the survey they would be entirely reliant on the state pension when the retire, compared with 16% of people across all employment types retiring this year in the UK. This equates to 792,000 UK residents.

Other self-employed workers included in the survey said they would supplement their retirement incomes with money from a range of other sources. Nearly half (48%) plan to draw on savings and investments, 25% will use their partners' pensions and almost one in five (19%) will use funds from the eventual sale of their businesses.

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.'

He added: '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.'

Among business owners without a pension, 63% said they don't plan to start one in the future, 13% said they did and 24% were undecided.

At the same time, the survey found that 27% of business owners who do have pension savings had put their personal contributions on hold since the start of the economic downturn.

This article appeared in our October 2012 issue of The Actuary.
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