Topic overview

Private pensions

A couple are enjoying their retirement playing golf together in the sunshine

As a business owner, you tend to be focused on the growth and financial stability of your business. But at the same time, you mustn't forget your own personal financial position.

As well as making sure you can cover your day-to-day expenditure, you need to plan your long-term financial security. A personal pension can be an important part of this planning.

Do I need a private pension?

Being realistic is the key to pension planning. Start by thinking about when you want to retire and what level of retirement income you would like. You can ask HMRC for a state pension forecast to see how much this is likely to contribute.

Business owners sometimes plan to make up the difference by selling their business when they retire. While this may be an option, it can be very high risk to have too much of your money tied up in the business. Similarly, relying heavily on downsizing your home to fund your retirement is risky.

Taking all this into account, you should be able to estimate how big a shortfall you need to cover. The best way to save towards this is likely to be through a mix of pension contributions and other investments. You may want to take independent financial advice on how risky and how tax-efficient different options are.

Your personal pension options

Pension saving can be a very tax-efficient way to save for your retirement. Making pension contributions can also be a good way to take money out of your business before an eventual sale.

If you provide an employee pension scheme, the simplest solution might be for you to be a member of this scheme. But there are other pension options for business owners.

If you are a sole trader, you might set up your own personal pension scheme. In a larger organisation, you might want to provide some kind of executive pension plan that makes more generous pension contributions for yourself (and perhaps other key employees).

If your business is a company, having pension contributions made directly by the employer (rather than out of your income) offers additional National Insurance savings. As a company you might also consider using a Small Self-administered Scheme (SSAS) which allows part of the money saved to be used to fund the business.

As setting up a new pension scheme can be complex and costly, you should take expert advice.

Pension income calculator


Work out how much income you are likely to receive from your pension. Enter your yearly earnings and how much you already have in your pot to work out how much you should be saving. You'll also and a forecast of how much you’ll have when you retire.

Use the Penfold Pension Calculator.

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