Pension Freedoms and Rise in Business Startups

1 August 2015

Will Pension Freedoms Fuel a Rise in Business Startups? When the government's new pensions freedoms were introduced, there were many obvious benefits for savers. The power to do what they want with their pension pot meant that many people whose personal circumstances may not have been suitable for the traditional annuity now had more options of what they could do with their money. Having full access to their pension from the age of 55 meant that if they so wished, they could cash in their entire pensions and spend it or invest it however they wanted to.

But what other benefits are there to these freedoms? Well one potential benefit has been highlighted thanks to a study by researchers Danmarks Statistik on behalf of Denmark's capital region Hovedstadsregionen. Danish savers have for some time had similar pension freedoms to the UK and the study was designed to look at how the Danish people intended to invest their pension pots.

One of the more surprising statistics was that overall, 29% of Danish savers were interested in investing their pension savings in start-ups. Men were more interested than women, with 38% of men looking to start-ups compared to 21% of women. A spokesman for the Hovedstadsregionen region Marlene Haugaard said that the news had been welcomed by businesses:

"I think that the prime reason is people want to support society development, there is a growing need for alternative ways to raise capital, so this could be the answer to the problems many companies face when their plans are ready, but the last funds are lacking."

So could this eventually be the case in the UK? There's no reason why not. Denmark has recently had two big business success stories, Universal Robots and Endomondo. The latter recently sold the mobile sports app it had developed to USA company Under Armour for over $85 million and Teradyne bought Universal Robots for $285 million. These are thought to have spurred the Danish interest in investing in startups and technology, so there is no reason to think that similar UK success could have the same effect, especially with the UK's interest rates having been so low for so long.

Whatever the case, the introduction of UK's pension freedoms has opened up another accessible route for start-up cash for young businesses, which should see boost to job creation and growth. It also provides investors with an interesting, albeit risky choice to invest their pensions.

This isn't the first time we've mentioned alternative ways people have been investing their pension, check out these out of the box investments.

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