Business Group Urges Use of Pensions to Fund Retiree Startups

UK business organization the Institute of Directors (IoD) has called on the British government to introduce limited, tax-free withdrawals from personal pensions if the money is used for start-up investment.

“People in their 60s now are on the front line of the shifting boundaries between work and retirement,” said Lady Barbara Judge, chairwoman of the IoD. “The government should consider introducing tax incentives to encourage people to pursue their ideas and invest in training, so that they can continue to have fulfilling working lives beyond the age expected by previous generations.”

The IoD also called for the tax system to be flexed to encourage individuals to access different types of training through their working lives, proposing the introduction of a so-called shadow personal allowance to offset an individual’s income tax liability.

The suggestions were part of a recent IoD report that included a survey that found 53% of respondents—the majority of whom are over 50—identified themselves as entrepreneurs. It also found that one in six business leaders plan to never retire.

“For some of these individuals, the answer may be to set up their business,” said the report, titled The Age of the Older Entrepreneur. “Age is not an obstacle to starting a business, but like young people, those starting a business later face challenges, albeit different ones.”

The report includes case studies that show entrepreneurs approaching or after retirement age setting up companies, including Susi Lennox (72), who started a business that make a natural lubricant range called YES, and Steve Perry (59), who launched an online platform that helps people over 50 find work.

“It is crucial that those who choose these routes have the right tools, and feel adequately supported in the process,” said Judge. “Choosing to take financial and business risks later in life can be difficult, and I applaud any person who decides to take this route.”

Some suggestions from the report include:

• Raising awareness of support plans available to older founders. Many of the support plans available to startups—including funding initiatives—have been poorly publicized by the government in recent years, according to the IoD.

• Boosting an interest in training, and higher participation rates in adult education. “The IoD has also consistently said that individuals will need to re-enter training throughout their working lives in order to ensure they are protected in a changing jobs landscape,” said the report. “Older individuals looking to start new enterprises or remain in work generally will need to access lifelong learning as much as anyone.”

• Increasing the potential of personal pensions as a means of investing in new businesses. “A theoretical cap on the withdrawal amount could be set at, say, £100,000 ($133,000), or 10% of the fund value if smaller, provided that they are invested in the same tax year in the ordinary share capital of a qualifying trading entrepreneurial company,” the report said.