Retirement planning for business owners

For many business owners, the business is the retirement plan. That can work but it also creates risk.

If most of your future wealth is tied up in your company, your retirement depends on buyers, timing, markets, tax rules, and health. This article explains how retirement planning for business owners really works, the risks to avoid, and how to build a business owner retirement plan that isn’t dependent on a single outcome going perfectly.

How does retirement planning differ for business owners?

Most employees build retirement wealth gradually through pensions and savings. Business owners often build it in one place, the business itself.

As a result, many owners become over-reliant on a future sale that may not occur on their preferred timeline or at their desired valuation. Wealth becomes increasingly illiquid, tax exposure at exit rises, and personal financial security is concentrated in a single asset performing well at the right time. For this reason, retirement planning for business owners must go beyond the assumption of simply ‘selling the business one day.’

What should you do with your business?

There are only a few real outcomes for a business, and each affects retirement planning differently.

• Sell the business: This can create capital for retirement, but timing, structure, buyer demand and tax planning all matter as much as valuation.
• Transfer the business: To family, partners or management. This often creates income rather than a lump sum, changing retirement cashflow planning.
• Wind the business down: Common in owner-led and service businesses. In this case, retirement funding must come from pensions, investments and savings built outside the company.
• Retain income ownership: Some owners step back operationally but retain dividends or income streams.

A resilient plan works across more than one scenario, not just a perfect sale.

When should you begin retirement planning?

Early planning creates options. Late planning creates pressure. A simple timeline approach:

10–15 years before retirement

• Build personal wealth outside the business.
• Start separating personal and business finances.
• Use pensions and long-term investments.
• Reduce reliance on a single future exit.

5–10 years before retirement

• Clarify exit options.
• Model retirement income needs.
• Begin structured tax planning.
• Prepare the business for value and flexibility.

0–5 years before retirement

• Finalise exit route.
• Structure sale or succession.
• Lock in tax strategy.
• Align investment and income planning.

How to plan for retirement as a business owner

A strong business owner retirement plan usually includes:

• Wealth diversification: So your future isn’t dependent on one asset.
• Exit planning: Not just selling, but structuring, timing and tax positioning.
• Income planning: Understanding how retirement income will actually be generated.
• Tax planning: At both business and personal level.
• Contingency planning: For early retirement, illness, business disruption or forced exit.

Pension planning for business owners

Pensions are one of the most powerful and most underused tools available to business owners. In many cases, company pension contributions are treated as a business expense, allowing profits to be moved from the business into personal long-term wealth in a highly tax-efficient way.

In simple terms, this allows money to move from the company environment into your personal name without Income Tax or National Insurance, while also reducing corporation tax exposure subject to the relevant rules and allowances.

This creates several advantages:

• Tax-efficient transfer of wealth from business to personal ownership.
• Long-term investment growth in a protected environment.
• Reduced reliance on a future business sale.
• Flexible retirement income planning.
• Greater personal financial security.

For many owners, pensions act as the bridge between business success and personal financial independence. Used properly, pensions allow business owners to convert trading success into personal financial security gradually not in one high-risk event.

FAQs

What if my business isn’t valuable or attractive enough to sell?

Then retirement funding must come from assets outside the business. This makes pensions, investments and diversification essential.

What if I need to retire earlier than planned?

Liquidity becomes critical. If wealth is locked in the business, early retirement often forces poor decisions.

Is there a difference for different business structures?

Yes. Sole traders, limited company owners and partners all face different planning rules, tax treatment and exit options.

Should I build up money in the company and make a large pension contribution before sale?

This can be effective in some cases, but it must be structured properly. Timing, allowances and tax treatment all matter.

How can Gerald Edelman help?

At Gerald Edelman, we combine wealth planning, tax advice and business advisory into one joined-up approach.

We don’t just look at investments. We look at:

• Your business structure.
• Your exit options.
• Your personal wealth.
• Your tax position.
• Your long-term income needs.

Whether you plan to sell, step back, transfer ownership or wind down, we help you build a retirement strategy that isn’t dependent on a single outcome.

If you’re a business owner thinking about the future, now is the right time to start the conversation.

Get in touch with Gerald Edelman to explore your retirement planning options.

Gerald Edelman Wealth Limited is an appointed representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority. Gerald Edelman Wealth Limited is entered on the FCA register under reference 971871. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk