Rise In Over 55s Using Retirement Savings To Set Up Businesses Later In Life, Survey Suggests

Forget relaxing in retirement, a survey has found that a growing number of people over the age of 55 are using their savings pots to become later-life entrepreneurs.

Axa Wealth, which surveyed 1,500 people aged over 55, found that 10% are considering drawing money from their pension to start a small business or go into consultancy.

More than one in three (35%) people planning to set up a new business said it had been a lifelong dream. One in four liked the idea of turning something which had previously been a hobby into a venture which could make them some cash.

Nearly one in five (19%) said they wanted to carry on using skills they had built up during their careers.

The research found regional variations in the types of business people planned to run, with tea shops being popular in the South West of England and manufacturing a common goal in the Midlands.

Businesses specialising in alternative medicine, travel, accountancy, computer repairs and art galleries also featured highly, according to the findings.

The pension reforms, which came into place on April 6, mean that people aged 55 and over with a defined contribution (DC) pension pot can take their money how they wish, rather than being required to buy an annuity, which would give them a fixed income usually lasting for the rest of their life.

Generally, the first 25% of the pot is tax-free, with the remainder subject to the saver's marginal rate of income tax in that year.

Of those considering starting a business, almost half (47%) said they intended to use their 25% tax-free lump sum to fund their start-up.

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In addition to creating a business or going into consultancy, almost 9% of people surveyed said they were thinking about investing in a franchise using some of their pension pot.

Margaret Mountford, known for her role in the BBC's Apprentice series, said it was interesting to see the number of people considering "silver start-ups".

She suggested the findings may be partly due to people generally living longer, with many people expecting to live for 25 or 30 years after they have ended their main career.

Asked what advantages older entrepreneurs may have over younger ones, she said: "You may know more about how the world works and have contacts and networks. On the other hand, third parties may not be so willing to finance you."

She also said that working later in life could help to keep people's brains active.

But Mountford, who stepped down as Lord Sugar's aide in The Apprentice in 2009 to concentrate on academic studies of ancient Egyptian manuscripts, also warned people to be aware of the risks they could be taking by ploughing lifetime savings intended for their retirement into a business.

She said they may want to consider getting financial advice or speaking to a mentor.

She added: "A lot of businesses fail. It's important not to underestimate how much work and effort it takes in starting something off."

Pension firms have previously said that early queries they have had so far from customers have been around people looking to take some cash, which they say is in line with expectations as this reflects the new part of the pension rules.

They have said people appear to be taking time to consider their options. Firms have reported that older people have been looking to take money for a range of purposes, including new kitchens, holidays and even speedboats.

Adrian Lowcock, head of investing at Axa Wealth, said: "We are seeing a diverse approach, with the over 55s taking to the freedom and opportunities created by the pension reforms - in this case fuelling a new generation of later-life entrepreneurs."