By Daniel Hunter

New research indicates that one in ten of the UK’s over 55s who are due to retire in the next 18 months are considering drawing down on their pension pots to start a small business or go into consultancy.

This ‘later-life entrepreneurs’ trend could see over half a million over 55 year olds shun retirement in favour of starting up their own business venture.

The average value of a pension pot of those asked was found to be £550,000, and of those considering withdrawing money to invest in a new business, almost half (47 per cent) intend to use their 25 per cent tax-free lump sum to fund their start-up.

Three main reasons were stated for starting a new business with released pension funds. For those planning on starting a new business, realising a lifelong dream to be a business owner was cited as the top motivation by over a third (35 per cent). For those planning on starting a new business, monetising a hobby was revealed as the investment incentive for a quarter (25 per cent). And for those planning on starting a new business, nearly one in five (19 per cent) are driven by the urge to utilise the experience and skills gained throughout their professional career in order to supplement their pension income.

The research also reveals how the pension reforms will vary in impact upon the UK’s different regional economies. The South West is expected to most likely experience a mini boom in teashops and restaurants with 22 separate new establishments being considered, while the Midlands could see a resurgence in manufacturing, with 25 new production facilities being considered in light of newly invested start-up capital.

Adrian Lowcock, head of investing at AXA Wealth which undertook the research, comments; “We’re seeing a revolution when it comes to retirement spending. The widespread concern that pensioners will blow their whole pension on a supercar feels exaggerated. Instead we are seeing a diverse approach; with the over 55s taking to the freedom and opportunities created by the pension reforms — in this case fuelling a whole new generation of later-life entrepreneurs.”

The top 10 sectors most likely to see this surge in small business investment are healthcare, travel and transport, professional services, manufacturing and utilities, telecoms and IT, education, HR, arts and culture, retail and catering, and legal.

In addition to creating a start-up business or going into consultancy, almost nine per cent are thinking about investing in a franchise using some of their pension pot.