Company directors and owners of SMEs make plans and do forecasts all the time. Cash flow forecasts, SWOT analyses, plans for renewals and refurbishment; there’s hardly a day when they’re not eyeball to eyeball with a spreadsheet.
So why do so many of them fail to plan their own retirements properly? In our experience company directors and owners of SMEs are so wrapped up running their business that they often forget their own financial planning – or simply don’t see their retirement planning as a priority. There is clearly a need for more directors to plan properly: why do so many of them fail to do so?
Over the years we’ve probably been given half a dozen answers when we’ve asked that question. As you’ll see, none of them really hold water…
“I haven’t got time.” The simple fact is that no one ever has time. And yet planning your retirement is one of the most important jobs you’ll ever do. As the old saying goes, a director or owner of a small business will either walk out of his business or be carried out of it. Assuming your preferred course of action is the former, then there needs to be enough money waiting when you do eventually walk out – and the only way you can make sure of that is to plan for it.
“It’s too early/too late.” It’s not too early if you’re in your twenties or thirties and it isn’t too late if you’re in your fifties or sixties. We know that in your twenties and thirties you’re working all the hours in the day to build your business: but trust me, you will get older – rather more quickly than you think. And yes, of course it’s easier to achieve savings targets if you have more time but the simple fact is that there is need for financial planning at all ages, as personal circumstances and financial planning goals are always changing.
“I’m going to keep working.” There seems to be a trend amongst some business owners and directors at the moment to declare that they’ll never stop working, that nothing is as satisfying as working so why would you ever want to stop? Unfortunately your health, your family and your competitors may eventually play a part in this decision. In our experience, there comes a time for every entrepreneur and director when ‘enough is enough’ and when that time comes it needs to have been planned for.
“It’s boring/not worth it.” In some ways this is one of the easiest objections to understand. Many directors and entrepreneurs – especially younger ones – have seen their own parents dutifully save for retirement and then not be very well off when they do finish work. Unfortunately, everyone now working faces a very simple fact: the population is getting older and the Government simply won’t be able to fund the retirement you want. Look at pensions from a different point of view – the tax planning benefits and flexibility to invest widely, including commercial property, that are available through Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSAS) make pensions ideal vehicles for business owners and directors to be creative in their retirement plans.
“The numbers are too big/too frightening.” Sadly, this is a reflection of proper financial planning. If we’re going to plan for the retirement you really want then the numbers will be big – and they will be challenging. But there is no point in us preparing a financial plan which provides less than you want – and it’s surprising what can be achieved if you save consistently and keep your savings and investments under regular review.
“My business is my pension.” Despite the fact that virtually no businesses are sold at exactly the right time for exactly the right amount of money, many directors and business owners still say this. Of course the answer is to build your business but you also need to build cash outside your business as well. That’s what gives you choice and control and, ultimately, that’s what allows you to dictate the timing and the quality of your retirement.
We’re always happy to talk about a client’s retirement planning. Directors and business owners can plan for their retirement very tax efficiently – and they enjoy flexibility which certainly isn’t available to normal employees. It makes sense to explore the options: we promise you that it isn’t too late and we’ll do our best not to be boring!