Why your pension is sexy
As a business owner, your pension may be pretty far down on your list of priorities. Perhaps you are throwing some money into one because your accountant said you should, or do the government-required minimum as part of your business.
I think a major part of the problem is the branding of pensions, they come across as boring. Saving for the future, yes you know it is important, but it is not exactly sexy.
The purpose of this blog is to change your mind so you see pensions in a new life.
The benefits of a pension
A pension is one of your best investment vehicles for building wealth as a business owner. Yes, the plan may be to sell your business for a huge sum of money, but this isn’t the only way to extract value from the business.
A pension has some great features which makes it attractive for any business owner such as
- Relief at your highest rate of income tax.
- Corporation tax relief for the business on contributions. (potentially 26.5%)
- Ability to put in £60,000 in a year depending on earnings.
- Using previous years' unused pension allowance.
- The money can be invested in the best companies in the world and grow over the long term.
- The amount invested grows in a tax-free environment.
All useful stuff, right? but still not exactly getting you hot under the collar.
The real reason a pension is sexy
Fundamentally a pension is just a vehicle for you to build your wealth long term. It’s like filling a car up with petrol, the more fuel the further you can go on your journey.
And this is the reason why your pension is sexy.
It lets you live a great life in the future!
If we start to think about what sort of life a pension can help you live, it becomes much more exciting. The ability to turn your hopes, dreams and possibilities into reality.
- It's going travelling around the world with your spouse/partner.
- It’s seeing all the things you want to see.
- It’s being able to spend time with people that matter.
- It's the dream holiday you have always wanted to take.
- It’s paying for your kid's wedding
- It's living the amazing lifestyle you want.
- It’s creating experiences for you and your family.
- It’s the holiday home you have always dreamed of.
- It’s stopping work if you want to.
A pension is actually about all the exciting stuff that you will be able to potentially do with it.
“It's about financial freedom”
A pension isn’t just about retirement it is about financial freedom, giving you choices and options when you are older.
When it comes to pensions, the more intentional you are about what you are doing regarding contributions or your investments the greater the impact there will be on your future lifestyle.
I.e. your ability to the stuff that really matters!!!
One piece of the puzzle
As always, the starting point is to have a financial plan around the life you want to live now and in the future. Then look at the best strategies to make this a reality for you.
A pension isn’t the only way to build wealth, but it certainly should be one of the tools in your bag especially if your business is building up cash reserves that it won’t need.
It is one piece of your overall wealth-building strategy. With a business exit the cherry on top.
As a business owner if you put money into a pension, you will pay less tax, but really you are creating a more exciting future for you and your family.
Start thinking about the life it will let you live, I guarantee that that boring pension is starting to look much more sexy.
This article is for information and guidance purposes only. It does not constitute financial advice which should be based on your individual circumstances. There are rules and limits on how much you can put into a pension. A pension can rise and fall in value. Please speak to a trusted financial adviser where possible.