Running your own business can often feel like an all-consuming journey. But what happens when you’re ready to step back? Many entrepreneurs fall into the trap of assuming their business will take care of their retirement. While your business may be your most valuable asset, relying on it alone is a risky strategy.
Key Insights
- Relying solely on your business for retirement is risky and could leave you exposed.
- Structured pensions like SIPPs, SSASs, and EPPs offer flexibility and tax advantages.
- Contributions made by your company can reduce Corporation Tax and build retirement wealth.
- Pensions can be used to purchase commercial property, allowing rent to grow your pension fund tax-free.
- From April 2027, pensions will fall within the scope of Inheritance Tax – plan ahead to protect your legacy.
Why Relying on a Business Sale Is a Gamble
It’s tempting to assume you’ll sell your business and enjoy the proceeds in retirement. But market conditions, buyer interest, timing, and unforeseen economic shifts can all derail that plan. Even if you do sell successfully, you may not receive the value you anticipated, especially if most of the company’s value is tied to your personal involvement.
Planning ahead ensures you have options. A structured pension plan gives you greater flexibility, tax benefits, and peace of mind, so you’re not depending entirely on one exit strategy.
Smart Pension Options for Business Owners
As a director or business owner, you have access to several pension schemes that can work alongside your company structure:
Self-Invested Personal Pensions (SIPPs)
SIPPs offer flexibility and control over your pension investments. You can invest in a wide range of assets, including:
- UK and foreign equities
- Commercial property (e.g., office or retail spaces)
- Unit trusts and investment trusts
- Gilts and corporate bonds
If you own your business premises, it may be possible to transfer it into your pension. We’ll explore this strategy further in the section below on buying commercial property with your pension.
Small Self-Administered Schemes (SSASs)
SSAS pensions are set up by companies for directors or key staff and provide similar investment flexibility to SIPPs.
However, they also allow loans back to the business of up to 50% of the fund’s value, which can be particularly useful for supporting cash flow or funding expansion plans.
A key advantage of an SSAS is that it can include up to 12 members, typically made up of family members and key employees. This makes it an effective tool for family-run businesses that want to combine pension planning with wider succession or ownership strategies.
Assets held in an SSAS are ringfenced for retirement but can still be used in strategic ways, such as purchasing commercial property or lending back to the business. These features offer both tax efficiency and operational flexibility.
This dual-purpose nature makes the SSAS a powerful vehicle for building long-term wealth while directly supporting the business’s success today.
Executive Pension Plans (EPPs)
These are occupational pensions set up by companies for directors or key employees. Employers can make significant contributions on behalf of the employee, which are considered allowable business expenses, thereby reducing the company’s corporation tax liability. Additionally, there’s no National Insurance due on these contributions, making them an efficient way to reward key individuals.
EPPs are typically set up under a trust, providing a structured way to manage pension benefits and investments. They also offer flexibility for directors who may wish to transition gradually into retirement. In some cases, EPPs can be used to draw down benefits while still working in a reduced or consulting capacity.
They can also form part of a wider employee benefits package, helping to attract and retain top talent in competitive sectors.
Tax Advantages for Company Directors
Pension contributions offer valuable tax relief. If your business pays into your pension, those contributions are usually tax-deductible as a business expense. Plus, investment growth within pensions is free from Income Tax and Capital Gains Tax.
Currently, pension funds can also be passed on to beneficiaries free from Inheritance Tax (IHT), making them highly efficient for wealth transfer. However, this will change from April 2027, when pensions will be included within the scope of IHT. It’s important to act now to take advantage of the current rules while you can.
Buying Commercial Property with Your Pension
Using a SIPP or SSAS to purchase commercial property can be a powerful strategy for business owners.
Not only does your pension own the property, but your company pays rent into the pension, which grows tax-free. This can significantly boost your retirement savings while keeping your business premises under your control.
It also allows you to retain full operational use of the space while effectively turning a business expense (rent) into a personal long-term asset. This strategy can be especially valuable for those running family businesses or planning for succession.
Additionally, it’s possible to release equity from a commercial property you already own by transferring it into your pension. Doing so frees up capital that can be used to reinvest in your company, fund growth, or improve cash flow, all while preserving the asset’s long-term value within a tax-advantaged retirement wrapper.
Don’t Delay Planning for the Future
Retirement might feel a long way off, but the earlier you start planning, the more options you have. Diversifying your retirement strategy with pensions alongside your business ensures a smoother, less stressful transition when the time comes.
At Ward Goodman, we work with business owners to build flexible, tax-efficient retirement plans tailored to their goals. Whether you’re interested in SIPPs, SSASs, EPPs, or want to explore property strategies, we can help.
Contact our team to start planning your retirement on your terms.
