According to the Centre for Aging Better there are more than 9 million workers aged over 50 in the UK, accounting for a third of those in employment.
And yet, in 2019, there were around 800,000 people aged between 50 and 66 who were not in work but wanted to be, a situation only worsened by the coronavirus pandemic.
The Office for National Statistics (ONS) confirms that those aged 50 years and over had the highest redundancy rate of all age groups, between December 2020 and February 2021.
The gap between age 50 and the State Pension Age had the potential to leave older workers struggling financially, even before the pandemic. This might partly account for the rise in the number of self-employed people aged 65 and over, which, according to Age UK, has more than doubled in the past five years.
Taking control of your own employment in later life can give you the chance to pursue a lifelong passion or continue in an industry you love, in a role – and with hours – that suit you.
But starting a new career later in life isn’t without risks.
Expert financial planning might be needed to decide if going self-employed is right for you, and HDA can help. Here’s how.
The dos and don’ts of becoming an “olderpreneur”
One consequence of the coronavirus pandemic for UK workers has been the rise of flexible working.
Flexible retirement – in the form of a move from cliff-edge to phased retirement – has been increasing in popularity for some time.
While for many, phased retirement means greater flexibility, supplemental income on top of their pension, and a diverting social outlet, for others, it can mean moving into a whole new phase of their career.
Here are some dos and don’ts.
Dos
1. Do factor the possibility into your retirement planning
Starting a business from scratch can be risky, but it has its potential rewards too.
If you have a lifelong passion you’d like to explore in later life, or you want to continue in work after you retire, factoring this possibility into your retirement planning can help to make it less of a risk, and more financially viable.
At HDA, the retirement plan we put in place for you is based on your goals. If your retirement plan needs to include the possibility of a new career in retirement, early preparations can help to make it happen.
Becoming self-employed in retirement can offer a chance to supplement your retirement income, stay mentally and physically active, and enjoy a work-based social life that can be flexible enough to work around your retirement.
2. Do make sure you have a business plan
Even with good long-term planning, it is likely that you will need extra capital, in the form of a bank loan, to make your business dreams a reality.
The best way to ensure your application is successful is to provide an in-depth business plan. This will need to factor in the costs of starting your business – premises, staff, marketing – as well as considering potential returns over the first few years of operation.
If you have been self-employed before you will understand the pressures associated with starting a business and the need to keep track of your profits and tax deadlines.
Remember that you’ll be paying Income Tax on both your employment and pension income – if it exceeds the £12,570 Personal Allowance. In-depth planning is key, and HDA can help, so be sure to get in touch.
Don’ts
3. Don’t forget to think about the knock-on effects on your pension
Depending on the type of business you intend to run, and for how long you expect to operate, you might need to think about whether you want to take or defer your State Pension.
You’ll also have to think about how and when you access the personal pensions you hold. Taking too much from your pension on top of your business income could push you into a higher tax bracket.
You might also trigger the Money Purchase Annual Allowance (MPAA). This limits your Annual Allowance – the amount you can pay into your pension while still receiving tax relief – to just £4,000. This might not be a problem if your business is doing well but limiting your ability to increase your pension wealth could be an issue if business profits are low.
4. Don’t forget to seek professional financial advice
Managing the finances of your business while juggling pension withdrawals and thinking about later life can be complex.
Financial advice can help and that is where HDA come in. We can use our experience to help you put a plan in place that works for you, your family, and your business.
Get in touch
At HDA, we want to help make your retirement dreams a reality, whatever those dreams look like.
Starting a business in retirement can be risky, but we can help to ensure your business is run tax-efficiently and that you remain financially stable and in control, both of your business and your retirement.
If you’d like to discuss how our decades of experience could help you, please get in touch. Email enquiries@hda-ifa.co.uk or call 01242 514563.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
