Olderpreneurs: Starting Up A Business

The rise of the olderpreneurs

News & Insights

MoneyPlus Features Team

12th November 2015 at 7:00am

If you think that self-employment is just for younger people? Think again!

Rising numbers of “olderpreneurs” are giving the younger generation a run for their money by setting up innovative new businesses.

10% are considering drawing money from their pension to start a small business or go into consultancy. Axa Wealth

Older and wiser

Watching the latest series of The Apprentice you’d be forgiven for thinking new entrepreneurs need to be young and thrusting go-getters, but this is not necessarily the case.  Equally energetic and passionate, these over 55s are drawing on a lifetime of experience to take a second shot at the working life.

The silver start-up

With life expectancy increasing, it’s no surprise that many baby boomers are delaying retirement and embarking on new career paths in later life.

Margaret Mountford, known for her role in the BBC’s Apprentice series, said it was interesting to see the number of people now considering what she labelled “silver start-ups”.

When asked what advantages older entrepreneurs may have over younger ones, she replied: “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.”

Funding the dream

And this lack of willing finance may well be the catalyst for some recent findings.

Research suggests that new pensions freedoms could be funding this new wave of “silver start-up” businesses, with one in 10 people approaching retirement considering using their savings pots to become a later-life entrepreneur. This is echoed in other news showing withdrawals of around £1bn have been taken via the pension freedom reforms.

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

They also discovered:

  • More than one in three 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 said they wanted to carry on using skills they had built up during their careers.

Accessing your pension

…bear in mind new flexible access rules mean you can take money out gradually…

New pension reforms 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.

But some care is needed if choosing this course. Pension savings are designed to provide income in retirement and spending this money early could mean a lower pension income later.

Furthermore, if you take a large, one-off sum, or your entire pension as cash, the tax will probably be much higher too, particularly if you’re still working. As the first 25% is tax free but the rest is subject to income tax of 20%, 40% or 45%, depending on the amount involved.

By taking out a big lump sum you could be sleepwalking into a tax bill as high as 45% and have a major impact on your future retirement income. Just bear in mind new flexible access rules mean you can take money out gradually, which helps you to be smart when it comes to tax.

Here to stay

With the pension age edging ever further away, and older entrepreneurs becoming a growing tribe, it seems that this trend is likely to become part of a long-term shift: recent projections about the working lives of millennials (those born between the early 1980s and 2000) suggest that many may need to continue working well into their 70s.

You’re hired

So with any new venture, no matter what age you are, careful thought and planning is essential. But with this blossoming new trend, I’m sure we’ll see a sixtysomething in Sir Alan’s boardroom yet!

Join the conversation

Join the conversation on our MoneyPlus Community or follow us on twitter @sl_moneyplus and Facebook.  Are you one of the olderpreneurs?  If so, we’d love to hear from you about what you’re doing now that you can access your pension pot.

The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment and its value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in November 2015. Your personal circumstances also have an impact on tax treatment.