In the current period of economic certainty it is vital that small business owners maintain pension contributions, advisers have said.
Daniel Wiltshire at Bradford-on-Avon-based Wiltshire Wealth said the small business owners he speaks to are battening down the hatches amid rising inflation and interest rates ticking up.
“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," he said.
Pension savings are for the future while bills and insurances are for todayKusal Ariyawansa, Appleton Gerrard“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, said 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, said 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,” he said.
“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 your family don't regress further should the worst happen."
Philip Dragoumis, owner of London-based Thera Wealth Management, said the company directors he works with see the UK entering a recession later this year.
Despite this, he said, this had made them want to increase their savings and pensions contributions.
“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,” he said.
“Pension contributions are still the best way to extract money from the company tax efficiently and reduce corporate tax liabilities."
sally.hickey@ft.com
