Farming News - Just 42.5% of farmers plan to use income from their farm in later life
Just 42.5% of farmers plan to use income from their farm in later life
Less than half of farmers plan to take income from the farm in later life despite 90% of them continuing to work, research commissioned by leading rural insurer NFU Mutual has found.
The vast majority of farmers plan to continue to be involved on the farm past retirement age, whether that’s taking on less intense jobs, helping out at busy times, or looking after the paperwork.
Despite this, just 42.5% plan to continue taking income from the farm. Instead, many older farmers plan to take income from pensions, with nearly three-quarters (73%) of farmers planning to use a private pension for income in later life.
Following Defra’s announcement of a proposed lump sum for English farmers to exit the industry, farmers are increasingly considering their later life plans.
And a survey of nearly 688 farms across England, Scotland and Northern Ireland carried out by the University of Exeter for leading rural insurer NFU Mutual has found that private pensions are the main source of income for farmers of retirement age.
A third of farmers (33%) plan to use income from letting property in later life and 40% plan to use income from other investments. Farmers were able to tick more than one source of retirement income when answering the survey.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Pensions provide an independent source of income for the older generation, giving them the freedom to take less from the farm.
“This can be particularly important when two and sometimes three generations are relying on the farm for their livelihood.
“Because of the range of options when it comes to taking money from pensions, it’s important to take advice to ensure you don’t pay more tax than you need to.”
Later life work
When they reach retirement age, around half of farmers (48%) plan to do the same work they currently do but less intensely, while 40% plan to help out at busy times.
Around a quarter of farmers plan to help out with paperwork, but only 10% expect to do nothing on the farm.
Lump sums for exiting farming
Defra have proposed a lump sum exit scheme for farmers in England which will, from 2022, give farmers up to £100,000 for leaving the industry.
Sean added: “This new scheme is likely to spark renewed interest in later life plans among farmers.
“Although the details of the payments have not yet been finalised, farmers will be looking at their pensions and other investments to see what options are open to them.
“Avoiding unnecessary tax bills by taking advice should be a key part of any later life planning.”
Advice key for pensions
Pensions are a key source of income for farming families, and they are also the most likely to spark the need for financial advice. Eighty-five per cent of NFU Mutual customers questioned in a separate survey said they would seek professional help for pensions.
This compared to 78% who would turn to an adviser for their investments, 46% who would seek help with an ISA, and 39% who required assistance with life insurance and other protection products.
Common pension traps
- Taking more than your 25% tax free cash entitlement from your pension can trigger an Income Tax bill.
- Money in pensions is normally free from Inheritance Tax. Cashing in part or all of your pension and putting the money in a bank account means losing this protection.
- Taking more than your 25% tax free cash entitlement reduces the amount that you (and your employer) can pay into pension from up to £40,000 each tax year, down to £4,000