UK entrepreneurs "too busy" to sort out their personal finances

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, according to new research by accountancy firm Kingston Smith.

The research into the wealth planning habits of UK entrepreneurs 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.

The research found that while UK entrepreneurs see their business as a job for life which will pay for their retirement - 73% plan to stay with their business for 10 years or more - they are failing to apply the same rigour and discipline to the preservation of their personal wealth as the running of their business.

Overall just under half (49%) 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, 16% of entrepreneurs expect to get nothing from the sale of their business and 60% of entrepreneurs, if they retired early at the age of 55 would not get a comfortable upper tax bracket income of £50,000 per year that they expect.

Andrew Shaw, head of private client group and partner at Kingston Smith LLP said:

“Entrepreneurs 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 ‘pension’ 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 won’t 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.”