Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How much money do business owners need to have in their pension before they can retire in the UK?

Many business owners are so focused on running their business and making it a success that they do not spend time considering their personal finances, and often neglect saving for their own retirement.

Business owners do not benefit from the government’s auto-enrolment scheme which is where a pension is automatically started for employees. Instead, they need to take control of their own finances and start planning their retirement themselves.

Even if your retirement feels like it is a long way off, it is important for business owners to save into a pension as soon as possible. The average life expectancy is increasing which means that pension pots need to last a lot longer than they used to. In 2017, 14,430 people in the UK were centenarians compared to just 2,500 in 1980. It is predicted that 160,000 people will be over the age of 100 in 30 years’ time*.

How big does my pension pot need to be?

Most people need around half to two-thirds of their annual salary to live on in retirement. When you retire, you are likely to have already paid off your mortgage meaning your outgoings are likely to be much lower than when you were working. You also no longer have to pay for a commute and your children may already be financially independent.

In 2017 the Office for National Statistics (ONS) said the average retired household now spends £21,770 a year*. You should consider the impact of inflation on the amount of income you will need and also unexpected costs such as healthcare.

Find out more about retirement planning

How much State Pension do I get?

If you have contributed to national insurance for 10-35 years you will qualify to receive the state pension. The maximum amount you could be entitled to per week in the 2020-21 tax year is £134.25. The State Pension does not start until the age of 65 and the amount is unlikely to be enough to cover your expenditure, therefore it is important that you also have a private pension to supplement your income.

A private pension also offers more flexibility when it comes to retiring early as the money in a private pension can currently be accessed from the age of 55.

When should I start a private pension?

The earlier you start saving for your retirement, the more time your pension pot has to potentially grow. Saving small amounts monthly can add up to a large pension pot by the time you reach retirement age. A Financial Adviser at Four Wealth Management can work with you to calculate how much you should be saving each month to help achieve your retirement goals.

Find out more about starting a pension

A private pension is one of the most tax-efficient ways you can save for your future as you can take advantage of tax relief of 20%, 40% or 45%, depending on your marginal tax rate, from the government on your savings.

This is on the basis that any tax relief over the basic rate is claimed via your annual tax return.

Review your existing pensions

Contact a Financial Adviser at Four Wealth Management today on 0117 973 0500 or email to book a no-obligation meeting to review your existing pensions and create a bespoke retirement plan tailored to you. The initial meeting will last approximately one hour and can be conducted on the telephone/video meeting, at our office in Bristol or at your home address.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

*Source: ONS, 2017

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

The Partner together with St. James's Place Wealth Management plc are the data controllers of any personal data you provide to us. For further information on our uses of your personal data, please see the Partner's Privacy Policy or the St. James's Place Privacy Policy.

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