Despite the recent high profile multi-million pound divorce cases where the Law Lords have ruled in favour of two ex-wives, which could effect future divorce settlements, the UKís entrepreneurs are gambling on their futures and are putting their personal finances at risk, reveals new research from top twenty accountancy firm Kingston Smith LLP. Alarmingly, saving and planning for the future are often not given adequate consideration by UK business owners.
The research into the wealth management behaviours of entrepreneurs shows that although they are boosting UK wealth and have the ability to create great personal wealth, many with small and medium enterprises are gambling on their futures.
Although entrepreneurs are successful at running businesses, they are not so successful at looking after the wealth they accrue. Many are committed to their business in the long term and plan that their business will provide the means they will live on when they retire. But, over half do not have a pension and almost one in ten has never invested in any kind of tax saving opportunity. As SMEs account for more than 99% of the total number of UK firms, representing more than half of the UKís private sector turnover these findings expose widespread risks.
UK business owners are putting their future wealth at risk because they are too busy running their businesses to plan for the impact that divorce from their partner or the recent changes in pensions laws would have on their personal finances.
The research shows that 93% of entrepreneurs will fail to review their personal finances in the wake of the recently announced changes to the pensions regime. They will also ignore the effect that marriage or potential divorce could have on their personal wealth with 85% failing to seek advice on how to protect their finances when they get married or commit to a long term partner.
While UK entrepreneurs see their business as a job for life which will pay for their retirementó73% plan to stay with their business for 10 years or moreóthey are failing to apply the same rigour and discipline to the preservation of their personal wealth as the running of their business.
Overall, under half of entrepreneurs regularly review their finances and 29% have not reviewed their finances in the last twelve months. Although entrepreneurs are prioritising their business at the expense of their personal finances in the belief that their business will be their pension, with 54% having no pension plans in place, the research shows entrepreneurs are seriously underestimating how much money they need to fund an early and comfortable retirement.
While 39% of entrepreneurs expect to become millionaires when they exit their business, yet 16% of entrepreneurs expect to get nothing from the sale of their business. But 33% of entrepreneurs are failing to generate significant long term value from their business which will enable them to buy as house in the sun when they retire.
While 60% of entrepreneurs expect a retirement income of 50,000 or more per year, few entrepreneurs actually have a real fix on what it will take to achieve that level of income. The reality is that unless business owners review their future wealth planning, few will retire into the lifestyle they dream of.
Andrew Shaw, head of private client group and partner at Kingston Smith LLP said: ìEntrepreneurs may feel that by running their own businesses they are taking hold of their own destiny, but their failure to plan adequately for the future could seriously undermine their prospects of profiting from their hard work. The fact that the majority of entrepreneurs do not have a pension and almost one in ten has never invested in any kind of tax saving opportunity is as alarming as the lack of regular attention they give to their finances.
While it is tempting for entrepreneurs to let day-to-day business priorities come first or plough every penny back into the business in the belief that it will be their ëpensioní which will take care of them in your old age, this is a high risk strategy.
Putting all of your eggs into one basket greatly increases the risk that you wonít have sufficient resources to live the life you want to after you exit your current business. And while it is vital that entrepreneurs put a plan in place to preserve their wealth for retirement, it is equally important that this plan is reviewed to accommodate changes in life circumstances such as divorce or to take advantage of or protect yourself from changes in the tax and pensions regime we have seen recently.î
The top aspiration for most enterprising individuals (56%) is to spend more time with their family, and over half of UK entrepreneurs seek to spend quality time abroad post exit. The research also reveals that the popular image of entrepreneurs as hard nosed business people is defunct, as 31% of entrepreneurs would like to invest unpaid time in charity work when they leave their business, compared with only 24% that would seek to start up another business.
New research reveals that the wealth of UK entrepreneurs is at risk
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