This figure has been estimated by Clifton Asset Management and Pensionledfunding.com.

It follows news from the Association of British Insurers last month that the over 55s cashed in almost £6billion of their pensions in the first twelve months after pension freedoms were introduced.

The firm made the calculation based on a range of studies, including ONS statistics.

It said this was a “highly conservative figure as many entrepreneurs will access more than their cash free lump sum (25 per cent) entitlement”. For instance, it said, entrepreneurs using pension-led funding, on average, access £70,000 from their pension to fund their business.

Mature entrepreneurs make up around two thirds of Clifton’s clients, with the average age being 53.

Clifton has completed more than 2,500 pension-led funding deals to help SMEs back their own companies, it reported, with a collective turnover of £1.6bn and providing over 16,000 jobs, these companies demonstrate the impact that Pension-led funding has had.

Adam Tavener, chairman of Clifton Asset Management and Pensionledfunding.com, said: “This last year we have seen a marked rise in entrepreneurs aged over 50 looking to use their pensions to either start a business, or fund an established enterprise. However, the government’s pension changes are not a giveaway for all business owners – particularly for those that wish to mobilise tens of thousands of pounds from their pension to fund their business.

“Also, many business owners have rushed into using pension freedom to cash in their pension fund, and taken little or no external advice. Taking this approach has even led to financial disaster, where some business owners invested in unsustainable businesses that could not provide a return on the pension investment. This ultimately resulted in the failure of the business and a loss of part, or all, of the pension.”

Clifton said business owners aged over 55 using their tax free allowance to fund their start-up may be taking the right strategic decision, but for larger pension investments, suggested considering pension-led funding as an alternative. It cited a Nesta report in conjunction with the University of Cambridge found that PLF was worth £24million in 2015. Clifton said Nesta had also found that almost two-thirds of SMEs using PLF saw their profit rise, and almost half employed more people.

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