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SME owners face retirement "time bomb"

A new report says small business owners in Britain have unrealistic pension expectations and could be sitting on a retirement "time bomb".

The report is based on the results of a recent YouGov poll of 1,200 SME decision-makers conducted by the Forum of Private Business and Clifton Asset Management; it found that over half of small business owners say they have inadequate pension pots to fund their retirement and many fear they will outlive their retirement funds.

Of the SME owners questioned, 42% anticipate retiring at 70 or after, or not retiring at all, and more than half expect a pension pot of less than £500,000 to fund their retirement. In addition, 45% of Forum business owners fear they will outlive their retirement funds.

The report, entitled Pensions and Small Business - Ticking Time Bomb or Hidden Treasure?, also finds that there is a "significant over-reliance" on residential property, with 63% of those polled believing their homes will help fund their retirement.

While the 2015 Pensions Freedoms legislation has opened up new options, the report finds that pension-led funding is still viewed with concern even though it could improve retirement prospects for many SME owners. While a third of business owners (30%) had accessed business funding in the past, and 59% expect to sell their business to help finance their retirement, only 38% would consider using their pensions now as a business funding source.

The Forum's Ian Cass said: "With many pension pots not providing sufficient income for retirement, there's a perception of 'irrelevance' or dead money by many pension-owning SMEs. Even though they don't currently deliver adequate returns for many, we would encourage them to consider the risks and rewards of leveraging them in a smarter way in order to develop the value of their businesses."

Adam Tavener, Chairman and Founder of Clifton Asset Management and, said: "There's a lack of education being proffered by the advisory community and a lack of innovation among financial services providers. A knowledge-based approach is essential to drive good decisions for SME owners to make the most of their pensions and fulfil their business and retirement expectations."

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