Silver entrepreneurs should get pensions tax break

Older people should be allowed to take 10 per cent of their pension pot to fund a new business, the Institute of Directors has suggested.

In a report, titled The Age of the Older Entrepreneur, the Institute of Directors stated that 16 per cent of business leaders plan never to retire, and more than half of the body’s members identify themselves as entrepreneurs.

Lady Barbara Judge, chairman of the Institute of Directors, said: “People in their sixties now are on the front line of the shifting boundaries between work and retirement.

“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 Institute of Directors proposal would see limited, tax-free withdrawals from personal pension pots if money is earmarked for start-up investment, in addition to the current 25 per cent tax-free allowance.

The organisation suggested that 10 per cent of a pension pot might be enough to make a difference.

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

Experts have welcomed the Institute of Directors idea, but cautioned that take-up might not be great.

Stuart Price, partner and actuary at Quantum Advisory, said it was “an interesting proposal”.

He said: “People are working longer – many into their mid and late seventies – so the concept could be of real interest to them. Older people don’t necessarily want to be working nine to five, five days a week, or doing strenuous, manual jobs.

“Offering an incentive like this could allow them to set up a business that they can run in their own time, doing roles they enjoy and are physically able to do.

“However, anyone who has ever set up a business will know it’s not as simple as it sounds.

“Not only does it take a lot to establish a company and build a client-base, there is ongoing paperwork and people often find themselves working much longer hours than the traditional nine to five.

“Despite the additional 10 per cent tax-free lump sum, this may not be enough of a financial incentive for older people to set up their own business.”

Howard Bullock, managing director of Clear Financial Advice in Billericay, Essex, said that although he did have entrepreneurial clients in their sixties he could not see wide demand for this tax break.

He said: “I think that in many cases people who would want to do this already have other resources that they might use.”

rosie.murray-west@ft.com

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