For many, the dream of starting a business doesn’t fade with age—it evolves. In fact, individuals over 55 often bring deep experience, valuable networks, and a clear sense of purpose to their ventures. If you’re thinking of using your pension to launch a business, you’re not alone.

Thanks to the Flexible Pension Access policy introduced in April 2015, new doors have opened for self-funded entrepreneurship in later life.

Flexible Pension Access: Could It Be Your Startup Seed Capital?

Under this policy, individuals aged 55+ with defined contribution (DC) pensions can access their pension pot with more flexibility. Notably, you can withdraw up to 25% tax-free, providing a potential source of initial funding for a new business.

This can be a game-changer—particularly for those who may face barriers to traditional funding due to age-related bias or credit constraints. Using a portion of your pension gives you greater control over how and when to get started.

Balancing Opportunity with Caution: What to Consider

While accessing your pension to fund a business offers freedom and flexibility, it’s important to weigh the decision carefully. It’s not inherently risky—but like any financial decision, it comes with trade-offs.

Here are some key considerations to help you make an informed, balanced choice:

Preserving Long-Term Financial Security

Tapping into your pension reduces your overall retirement savings. Ensure you’re not putting core retirement needs at risk. Any funds used should be an amount you could afford to lose without compromising your financial future.

Understanding the Tax Impact

Only the first 25% is tax-free; additional withdrawals are subject to income tax. Depending on how much you take, this could nudge you into a higher tax bracket. Speaking with a tax advisor can help you plan effectively.

Business Viability and Planning

All startups carry some degree of risk. While your experience is an asset, it’s wise to approach your venture with robust planning. A lean, validated business model reduces the likelihood of costly missteps.

Time and Energy

Starting a business is exciting—but it also requires time and energy. Consider your lifestyle, health, and personal commitments. Make sure your plan is sustainable and aligns with your goals and capacity.

Impact on Benefits

In some cases, pension withdrawals or business income could affect eligibility for means-tested state benefits. This won’t apply to everyone, but it’s worth reviewing.

Your Later-Life Startup Checklist: Planning with Confidence

Using your pension for a new venture can be a strategic move—with the right preparation. Here’s a quick checklist to guide you:

Start With Your Retirement Plan

• Know your essential living costs in retirement.
• Map out all other income sources (e.g. State Pension, savings, investments).
• Set a clear limit for what you can invest—only use what you can comfortably afford to risk.

Build a Smart Business Plan

• Test your business idea through market research or a small pilot.
• Create realistic financial projections and cash flow forecasts.
• Explore alternative funding (e.g. Start Up Loans, grants, crowdfunding) to reduce reliance on your pension.
• Start small—prove your concept before scaling.

Get Tax & Financial Guidance

• Understand your pension provider’s withdrawal rules.
• Estimate your potential tax liabilities.
• Speak to an independent financial adviser who can assess the full picture.

A Final Thought: Empowerment Through Preparation

Using your pension to fund a new business can be the start of an exciting and fulfilling chapter. With careful planning, sound advice, and a realistic view of your finances, it’s possible to pursue your entrepreneurial goals without putting your retirement at risk.

This isn’t just about managing risk—it’s about maximising opportunity while staying financially secure. Your experience, insight, and drive are valuable assets—and they could be the foundation of a successful new venture in later life.