Three in 10 business owners do not have a pension independent of their business, according to Rathbones Group.
Additionally, the wealth and asset management group, which polled 3,092 adults, including 10% business owners, found that 44% do not hold an ISA of any kind.
The vast majority (95%) have money in savings accounts and/or premium bonds, suggesting many are prioritising short-term cash over long-term planning.
Faye Church, senior financial planning director at Rathbones, said: “We often meet owners of successful businesses who see their company as their retirement plan and prioritise reinvesting back into the business over pension saving. That’s often driven by a desire to grow the business, and the belief that a future sale will ultimately take care of retirement. But relying on a business alone to fund later life is a risky strategy.
“The future is unpredictable. Small businesses can be hit by economic shocks, supply chain disruption, losing customers or a crisis no one sees coming. That makes it hard to know what your business will be worth when you eventually step back or even whether you’ll be able to sell it at all.
“Without a pension, you could end up with far less to live on than planned, and even a successful sale may still fall short of funding the lifestyle you want in retirement.”
Looking specifically at entrepreneurs, 24% of respondents said they do not have a pension and more than a third (36%) do not have an ISA. However, 95% hold savings and/or premium bonds.
Gordon Lawrie, senior investment director at Rathbones, commented: “From our dealings with early-stage businesses, there are often many competing financial pressures, from irregular cash flow and reinvesting in the company to paying down borrowing or covering personal expenses.
“But for limited company owners, contributing to a pension can be one of the most tax efficient ways to extract money from the business and invest for the future.”
Church said limited company owners can make employer pension contributions directly from the business rather than paying themselves and contributing personally. These payments are made from pre-tax profits and do not attract national insurance. With employer NI set at 15% from 2026/27, this can represent a significant saving compared with taking the same amount as salary.
Employer pension contributions can also be offset against a company’s corporation tax bill. Depending on the rate paid, this could reduce corporation tax by up to 25%, making pensions one of the most tax efficient ways to extract profits from a business.
Furthermore, Church said business owners can currently contribute up to £60,000 a year into a pension. The removal of the lifetime allowance also means it’s possible to build a larger pension pot without the risk of additional tax charges.
