IFA warns small business owners putting pension contributions and protection on back burner as economy deteriorates

by | Jun 1, 2022

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Following a warning from the Federation of Small Businesses that as many as 500,000 small businesses are at risk of failing within weeks, we asked IFAs and brokers what they are seeing with their small business owning clients.

One has noted small business owners are putting “pension contributions and personal finances on the back burner for the time being”, as the cost of living crisis accelerates and the economy deteriorates. The responses of five IFAs and brokers, and what they are advising their clients to do, are below.

Daniel Wiltshire at Bradford-on-Avon-based Wiltshire Wealth: “The small businesses owners I speak to are battening down the hatches. With staff wages and input costs rising and recession on the horizon, they’re understandably wary of making any financial commitments in the short term. The old adage that business owners get paid last feels apt at the moment, with pension contributions and personal finances being put on the back burner.”

Rob Peters, director of Altrincham-based Simple Fast Mortgage: “There will certainly be business casualties in the coming weeks and months. This sentiment is reflected in the attitude of the limited company directors we work with. When discussing business protection and income protection, many are putting these types of financial decisions on hold due to current levels of economic uncertainty.”


Kusal Ariyawansa, a chartered financial planner at Manchester-based Appleton Gerrard: “In times of hardship, it is vital to maintain essentials while knowing that luxuries can be deferred. Pension savings are for the future while bills and insurances are for today. You can plan for and restart savings but you can’t do much if things go wrong. It is therefore vital to maintain existing safety nets so that you and you family don’t regress further should the worst happen.”

Steve Perera, chartered financial planner at Britannic Place Financial Management: “Fortunately, we have not had any of our business owner clients contact us in distress as yet. However, if any were to do so, we would need to ascertain how serious the problem really was, which might involve talking to their accountant. In the most serious of cases, we would probably advise that the business owner stops making pension contributions until the situation eases. We would then regularly check in with that client to ensure that they do not stop the contributions for any longer than necessary, as this can damage their long-term financial plans.”

Philip Dragoumis, owner of London-based Thera Wealth Management: “The company directors we work with are currently managing to weather the inflationary storms and on the whole their companies are financially robust with good cash reserves. However, they do see the UK entering into a recession later this year. If anything, this has made them want to increase their savings and pension contributions rather than reduce them, and if necessary cut back on other expenditure. Their investments are their Plan B in case their business suffers and an eventual exit becomes more difficult to achieve in the future. Bear in mind that corporate taxes and dividend taxes are all heading significantly higher as the UK faces its heaviest tax burden in three generations. Pension contributions are still the best way to extract money from the company tax efficiently and reduce corporate tax liabilities.”


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