After a life of hard manual work, most people of retirement age had approximately five years to savour the meagre entitlements available, before shuffling off this mortal coil aged, on average, 52.
The future for retirees today could not be more different, the years that follow the end of a working life are no longer counted in single digits but normally, decades.
For many, their retirements are a time of new opportunities when a lifetime of prudence and investment in pension pots pays off.
With the advent of new pension freedoms enabling savers to draw down large lump sums from their pensions without large tax penalties, it might be possible for a generation of ‘silver entrepreneurs’ to emerge.
According to the Daily Mail, a tenth of retirees are now considering taking the plunge and setting up small businesses with their nest eggs and on average, the size of the pot they can draw from is £550,000.
This suggests that the desire to ‘start a business using my pension’, is widespread amongst retirees.
A lifetime of expertise
Ending a career at 55 or 65 has often meant abandoning a lifetime of knowledge and expertise acquired in a valuable and important field.
With new opportunities to ‘use my pension to invest in a business’ opening to entrepreneurial pensioners, these skills no longer have to go to waste.
It might be that in retirement you can establish the type of small business or consultancy that you had always dreamt of, one which is not necessarily based on your work.
Some retirees, used to a life of frenetic activity in business, have found doing nothing in retirement frustrating and there is growing evidence that simply ‘giving up’ at 65 is very bad for mental and physical health.
Even though many retirees might have had successful business careers, the prospect of cashing in up to a quarter of an entire pension pot in one go to set up a small business can be daunting.
Firstly, any investment is a risk, even if you think the business idea is sound and likely to work. Taking a risk when you are 35 is a different proposition to taking one when you are 65.
This means that, not only should you not gamble more than you can afford to lose (not that you can really ‘afford’ to lose any pension at all), but seeking professional business and investment advice is essential.
Many people who have worked in law, finance, engineering or other key professions or trades might have managed throughout their career to have successfully avoided ever creating a business plan or cash flow forecast.
Most local authorities run free business courses, which are always worthwhile investing your time in, but getting expert independent financial advice on your new business is also important.
Making the business as tax efficient as possible, ensuring that the right kinds of personal and professional insurance, or public liability insurance is purchased at as cheap a price as possible – these are the types of issues that a trained advisor can give you some guidance on.