Prudential today (23 November) announced the launch of an online tool to support financial advisers and accountants in developing best practice strategies for business-owner clients wishing to extract profits from their companies as part of retirement planning activity.
Prudential’s extracting company profits tool allows users to review and alter a business owner’s current remuneration structure to understand how this impacts factors such as income after taxation, the retained business profit, pension contributions and the tax payable to HM Revenue & Customs.
The firm added its latest research shows that more than two thirds of advisers say that establishing a formal relationship with an accountant will enable them to expand their existing business into providing services to large corporates and company directors, while 48 per cent believe they can target small and medium enterprises.
This was from a PollRight survey, which interviewed 120 independent financial advisers online on behalf of Prudential this year.
Les Cameron, head of technical at Prudential, said: “Remuneration strategies have never been higher on the agenda of small business owners.
“The change to dividend taxation coming into effect next April will hit small business owners hard, especially those who are currently using the popular strategy of relying heavily on shareholder dividends from their business to supplement a small salary.
“The need for advice has never been greater.
“As a result many business owners will want to rethink their current remuneration strategy which also creates the perfect opportunity for financial advisers and accountants to help them look at how they will fund their future income needs too.
“We predict that pension contributions will become a central tool in minimising the impact of next April’s dividend changes. Any income that is not required today could be used to fund employer pension contributions mitigating the effect of the new changes.
“There are of course wider benefits to pension savings in addition to operating your own business for retirement planning purposes. A pension is protected from any unexpected business failure, and gives business owners significantly more options in retirement, if they decide for example to wind down from their business, if ill health strikes or if it takes time to sell the business.”
Colin Rodger, director at Alexander Sloan Financial Planning, said: “I’m very positive about this. It is good to see this kind of support from providers. This is very topical and should prove very useful.”
ruth.gillbe@ft.com
