The number of people who label themselves as ‘retired’ before the age of 65 has fallen to a 23-year low and is now down to 1.19 million, according to recent employment figures from the Office of National Statistics (ONS).
The number of employees in workplace pension schemes is now over 9.5 million since the government introduced its auto-enrolment scheme in 2012, the ONS figures showed.
But what about if you are self-employed and run your own businesses? Is it easier to work towards the age of 67 and then hand the baton over, or are you more likely to hang on to your business for as long as possible?
The right time to retire
Angela Ashworth, co-founder of accountancy firm Purple Lime, says people should know when the time comes to retire. “In today’s digital economy industry and regulations are changing rapidly, so at some point one must ask oneself if you want to focus on keeping up to speed in order to ‘hang on’. Do you have the same enthusiasm, energy and capability – both physically and mentally – you had when you were younger? Are you actually delivering the service and knowledge your clients require as their industries change also?”
Ashworth, who plans to retire in three years’ time when she turns 60, says she intends to phase her retirement in gradually. “As of next year, I am decreasing to three days per week. I call it my ‘pretirement,’” she notes. “Whilst I thoroughly enjoy what I do, I want to spend more time with my family, travel as much as possible, be involved with charities or do something to ‘give back’ and pursue my hobbies. It will be great to hand over to younger members of the team.”
Seeking advice from external sources
Oli Thomas, who is in his late 20s and is Ashworth’s co-founder at Purple Lime, says he thinks it’s easier for employed people to retire. “If you’re self-employed, there is more of an onus to seek advice from external sources (experts, financial advisors etc). There is a tendency for business owners to put-off taking advice and starting to plan as they are too busy growing their business in the here and now.”
Ben Rendle, who has just started his own accountancy business and is in his 30’s, says many people from his generation may not be able to afford to retire. “At the present time, unless my business asset grows to such a level where the sale can fund retirement, starting a meaningful pension pot would take too much of my earnings and would be almost impossible with a young family to support.”
Funding your retirement
Rendle believes they need better financial education in schools to fully grasp the benefits of a retirement plan. “It’s not until you get a bit older that you realise it’s an up-hill battle to fund your retirement. In my own case I will be 69 before my mortgage is settled so I will have no choice but to keep on working.”
Steph Rickaby, director of Sunflower Accounts in Wiltshire, says the thought of working into her 70’s is very unappealing. “As a sole practitioner the thought of working until 67 is a daunting prospect,” she notes. “I am therefore quite happy to hand over the “baton” to the right person.”
Rickaby says she tries to make her business as client-focused as possible and that it will be essential to find a replacement who shares her values and outlook. “For me, going into business was always about disrupting the way that traditional accountancy practises were run,” she notes. “We wanted to put our clients and their business as the main focus not just compliance.”
Providing strong customer service and focusing on building relationships and being instrumental in decision-making processes are all key factors when it comes to finding a replacement, says Rickaby. “It is imperative that we build the right team and have the right people to assist in my exit strategy when I retire in ten years’ time.”
Building the habit to save
David Hearne, director and wealth management adviser at Satis Asset Management says self-employed people should start saving as soon as they start working but not necessarily for a pension. “This is in order to build the habit of saving for tax, and saving to cover lean times, not necessarily to put the money in a pension yet,” he notes. “Saving regularly, building a buffer, getting used to investing in an ISA, are all good building blocks before starting to make pension contributions with confidence and as part of a plan.”
You should also give your business a realistic assessment and price your work accordingly, says Hearne. “Is this just a couple of years of trying something new, of needing some flexibility, or is this the expectation for the rest of your career? If your self-employment is regular, you should treat yourself like your own employee and pay into your pension regularly.”
Georgina Fuller is an award winning freelance journalist and editor.