Pension fund: Vital resource for entrepreneurs

Entrepreneurs resort to pension fund

As cash flow dries up for entrepreneurs, they dip into their pension pots for startup investment. How? Let’s read on…

Salient points of the story:

  • Entrepreneurs turn to their pension funds when they face a deficit in bank.
  • This fund comes over and above the 25 per cent tax-free allowance permitted once a person turns 55. The remaining 75 per cent is subject to income tax, if withdrawn.
  • One in six business leaders never plan to retire, according to IoD’s research. Majority of them, aged above 50 would describe themselves as entrepreneurs.
  • In addition, the over 50s are setting up businesses faster than any other age group, according to the Centre for Economic & Business Research.
  • One such entrepreneur is Fiona Jarvis, who launched Blue Badge Style in 2012, when she was 57.

Pension-led funding works in several ways. The pension could make a loan to the business on a five-year term. The business’s intellectual property assets could be valued, sold and leased back to business. The third scenario would involve issuing shares in the business to the pension, which is then paid an annual dividend.

Excerpt from The Guardian


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