When you work nine-to-five and pursue a standard career path, the process of entering into a pension plan and saving for your future is largely automated. This is because employers tend to take the lead in the modern age, as they are required to opt you in to workplace schemes and make mandatory contributions.
From my perspective as a business owner, however, creating a viable pension plan and saving towards retirement is an altogether more complicated affair. Not only is it difficult to identify the right type of fund, for example, but it is also exceptionally hard to manage your finances and build wealth effectively.
Starting with the basics: Choosing the right fund
Aside from the daily running of my business, I find that my biggest challenge as an entrepreneur is making concrete financial plans for the future. After all, much of my wealth is tied up in my business venture, represented by assets and holdings rather than cold, hard cash. This makes it exceptionally difficult to separate income from profit, unless you afford yourself a fixed and viable wage as a CEO and categorise yourself as an employee of the business.
While this can free up the necessary funds to make regular pension contributions, the next step is to identify the best possible savings vehicle. In my experience as an entrepreneur, your two main options are a self-invested pension plan (SIPP) and a small self-administered scheme (SSAS), both of which share many of the same features. The latter is distinguished by the fact that only company directors are eligible to open a SSAS, while there is also a clause that enables account holders to withdraw funds and invest them directly into their business.
While this appeals to many, it does not help you to effectively save for your future. Similarly, it also affords you little flexibility, in contrast with SIPPs (which are accessible to everyone and can be sustained regardless of the career paths that you follow in the future). Choosing to invest in a SIPP does not restrict the range of assets that you have access to, either, so you can continue to seek out domestic and international options that form part of a diverse portfolio.
Managing your funds and building wealth
As you build your fund, the next challenge is to effectively manage your finances. Sure, you can take responsibility to some degree by minimising spending and creating an expenditure budget, but higher level financial planning requires expert assistance. You could use Tilney to help conceive and implement long-term financial plans, for example, making allowances for your own objectives and desire to save for your children’s future. By using financial experts in recent years, I have also been able to create a legally binding will and make detailed plans for the distribution of my estate in the event of my passing.
This strategy has afforded me considerable peace of mind, meaning that I can concentrate on running my business and optimising my future pension fund while delegating the management of this capital to professionals. More specifically, I can focus on what I am good at and employ those with knowledge of financial planning to help me achieve my goals.