Can I use my business to fund my pension?
Many business owners explore the idea of selling their business one day to help fund retirement. It’s a natural consideration when you’ve spent years building something valuable. The challenge is that the numbers across the UK show how unpredictable that route can be.
Just one in five self-employed people pay into a pension scheme, according to a survey by think-tank The Social Market Foundation, compared with 78% of employees.
At the same time, Institute for Fiscal Studies research shows that only a minority of UK SMEs sell successfully, often estimated between 20 and 30 percent. Many close, transfer to family or wind down instead. This doesn’t make a sale unrealistic, just less dependable than a structured pension plan.
A pension gives you a consistent, regulated structure that doesn’t rely on future buyers, market timing or the business being transferable. The business can support that plan but it shouldn’t be the plan.
How your business can support your pension
A limited company can make employer pension contributions for its directors. These contributions are usually deductible against corporation tax if they are wholly and exclusively for the purposes of the trade. HMRC sets out the rules here.
Employer contributions also avoid National Insurance when they are made outside a salary sacrifice arrangement. That makes them a practical way to move profit into long term savings while keeping your tax position tidy.
Personal contributions can sit alongside this, and you receive tax relief at your marginal rate. The blend of company and personal contributions often gives the best balance between flexibility and long term planning.
A quick note on the 2025 Autumn Budget
From April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free from employer and employee National Insurance (currently there’s no cap). Contributions above that level will attract NICs. Ordinary employer contributions remain exempt.
If you currently use salary sacrifice, it’s worth reviewing whether that structure still serves you in the long run.
Practical steps to shape your strategy
These steps keep things aligned with the Budget changes and help you build a retirement plan that works regardless of whether you sell the business or not.
Build contributions into your normal rhythm
Monthly or quarterly contributions keep things consistent and help you avoid leaving planning until year end.
Reconfirm your retirement target
Whether you want to slow down, exit fully or pass the business on, knowing your target gives you a clear benchmark for the level of contributions you need.
Treat exit value as optional upside
If a sale comes together later, great. Your core plan will already be doing the heavy lifting.
Keep an eye on future Budgets
The NIC changes for salary sacrifice are several years away. A quick annual review keeps you ahead of any shifts.
What to do next
Take stock of what you already have across pensions, savings and investments, then compare it with the lifestyle you want in retirement. Add in what your business can sensibly contribute each year and check how close that takes you.
This is a clear way to see what’s working, what needs adjusting and what your future might look like without relying on a sale that may or may not happen.
If you want support mapping out a realistic and tax efficient retirement plan that works alongside your business, our Financial Freedom service gives you a roadmap to achieving the exit you want. Get in touch to find out more.