Older entrepreneurs have taken almost £1.5bn from pension pots to fund new ventures since the introduction of pension freedoms in 2015.
The UK's two million small business owners aged over 50 - known as olderpreneurs - could access more than £250bn from their pension pots to fund growth in their businesses, according to new analysis by Clifton Asset Management.
To date, olderpreneurs have used pension freedoms to take £1.45bn from their personal pension pots to fund new ventures. Data from the Office for National Statistics (ONS) published in March 2019 found that olderpreneurs have set up more businesses than any other age group in the past decade - rising from 1.47 million in September 2008 to almost 2.2 million in December 2018.
The ONS data also shows that although 30% of olderpreneurs have no personal pension wealth, the remaining 70% (over 1.5 million) collectively have access to over £250bn in small business finance from their personal pension pots.
From the age of 55, anyone can use pension freedoms to access funds from their pension pots. Many have used their tax-free allowance to fund a business, while pension-led funding (PLF) has funded over 2,500 businesses.
According to a survey by Age UK, more than 70% of businesses started by people in their 50s survive for at least five years compared to only 28% of those started by younger people.
"Study after study has shown that olderpreneurs run more successful businesses, generate greater profits and create more jobs than their younger counterparts," said Adam Tavener, chairman and founder of Clifton Asset Management and Pensionledfunding.com.
"But many have done this with one arm tied behind their backs because of a difficulty to fund growth due to strict lending criteria penalising older business owners or they have the majority of their wealth tied up in property.
"There is a real opportunity here to invest pension wealth in successful businesses with more than £250billion sitting in the pots of business owners aged over 50. Done properly, pension-led funding provides older entrepreneurs with significant amounts of growth capital by strategically redeploying their pension savings."
Ian Cass, FPB managing director, said: "The Forum of Private Business has seen growth in the number of older members starting new businesses, some as individual consultants, but also a significant number are growing their business from a one-person start-up to small businesses employing 5-19 employees.
"These entrepreneurs bring a wealth of knowledge and expertise to their new business, and if they receive the appropriate support and finance to develop and grow, they are a significant contributor to the UK economy."
Written by Rachel Miller.