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My business is my pension – or is it?

Retaining profit in a business makes good sense, especially in tough trading conditions, but keeping too much in the bank can put the businesses cash at risk if things go wrong.

My business is my pension – or is it?

Following some excellent trading years, the three owners/directors wish to draw retained profits from the business in a tax efficient manner, as they are concerned that they have too much cash. Furthermore, although they saw the businesses eventual sale as part of their retirement planning, they didn’t wish to rely on this.

Taking additional income from the business by way of salary or dividend would have resulted in more tax to pay and as they also wanted to fund for retirement outside of the business, they considered a pension plan as a suitable way forward. However, they realised that the complexity of pension planning meant they would need advice. After the initial fact finding audit, we were able to ascertain their requirements and affordability. It was of course essential for them to retain adequate cash in the business, but this still left them with circa £400,000 to extract.

Our recommendation was to implement a Directors Pension scheme and by using maximum pension funding and carried forward allowances we were able to extract £399,000 tax free. This reduced the taxable gain for the company within the trading year. We also consolidated previous individual pension plans into the new Directors plan, enabling them to utilise the services of a bespoke Discretionary Fund Manager* to manage their pooled funds. This reduced cost and improved risk management.

The Directors 5 year plan was to continue maximum funding in order to purchase a new trading premises within the pension scheme as tax efficiently as possible.


Bespoke pension advice will allow the Directors to achieve their goals of extracting and protecting capital, funding for retirement and their new goal of purchasing their own premises through the pension.

* click here for further information on our Central Investment Proposition

Charles, a divorced gentleman in his late 50’s with one adult child, had a very specific retirement target. This was great news as we were able, with the use of our retirement modelling tool, to advise him on the level of retirement savings required. We recommended a mix of tax efficient Pension and Individual Savings Accounts (ISA) funding.

Some 10 years later and on target, Charles decided to retire.

He had always been a cautious investor and in retirement, perhaps even more so. Our task was to therefore ensure he could retain lifetime income with minimal risk to capital, but still maintain his income target and allow for inflation. He was less concerned about leaving retirement funds on death as his son had a successful career and would inherit a substantial property.

Having analysed his basic living expenditure we recommended that this was funded from a ‘Guaranteed Indexed Linked Annuity’. This would give him peace of mind that crucial costs would always be paid for. The remainder of his savings would continue to be invested in cautious investment funds within a flexible drawdown plan, and used for non-crucial expenditure such as holidays, new car, gifts etc. This expenditure could be decided upon year on year dependent upon fund value and performance, but should in any case cover his planned additional lifestyle expenditure.

We were also able to plan for tax efficient income in retirement by using a blend of ISA, tax free cash from pension and pension income, thus reducing his tax burden.


Charles is now happily retired, enjoying spending time with his grandchildren, safe in the knowledge his income is appropriate to meet his needs, now and in the future.

Geoff and Clair, had built up pension savings in a number of plans over the years as well as building good levels of capital in their bank. Although they had a rough plan for retirement they didn’t really know when they could afford to stop work, but did have a wish to retire as early as possible as Geoff was conscious of his family history of early mortality. They had fairly modest living costs but did want to travel and explore the world and hopefully spend some time abroad in the winter sun.

After initial investigation we were able to ascertain the level of their total assets and a detailed breakdown of expenditure. This allowed us to use our Retirement and Cash Management Software and build an accurate picture of when they could retire and meet their expenditure goals. The software not only allows in-depth retirement planning but also calculates the best tax position for the client.

In their particular circumstances the current level of assets and savings was inadequate for them to realise their dreams and therefore additional saving was required. We were able to introduce modest change to the tax efficiency of their portfolio and regular savings by using ISA, Pension and Capital Gains Tax planning. We were also able to introduce a further level of retirement planning, allowing them to phase retirement over a period of time, thus allowing them to partially retire earlier than anticipated.


With careful planning and budgeting you can help ensure you have enough capital to retire and achieve your goals. Our advice is to take advice, use planning tools and most importantly start planning as early as possible.