Succession planning: Simple steps to protect your farm
16th October 2023
NFU Mutual has offered some top tips on succession planning, after a recent survey revealed over half of farmers don’t yet have a succession plan in place.
Just under half of UK farmers (48%) don’t have a succession plan in place, according to a new survey by NFU Mutual.
This figure has remained static for the past three year.
More than a third of farmers said they don’t have a plan because they think it’s relevant to them; while 16% admit it is relevant, but they haven’t got round to it.
Gregor Belcher, farming specialist at NFU Mutual, believes uncertainty in the industry over the past few years has meant deciding who to hand the farm down to, and how to do it, has dropped down the priority list for many farmers.
Simple ways to protect your business
Even if your farm does not have a natural successor, you can still protect yourself.
Partnership protection and key person insurance are two simple ways to do this, says NFU Mutual.
Chartered financial planner Sean McCann said: “Even if now isn’t the right time to make a succession plan for your farm, there are still some simple measures you can put in place to protect its future.
“Thinking of the ‘what ifs’ is a useful starting point, especially if you’re in a partnership.”
One of the biggest risks of a business partnership, is one of the partners may die, with his or her share passing to someone else – who may have little interest in the business, or worse still, could be hostile to your objectives.
Meanwhile a partner who suffers a serious illness might want to retain the option of continuing in the business or be compensated for their exit from the business.
“The ideal solution is to have a partnership agreement in place that sets out what happens if one of the partners dies, becomes seriously ill or wishes to exit the business,” Sean explains.
“This, together with each of the partners having up to date wills in place, will help ensure the business ends up in the right hands at the right time.”
Later life security
Another key consideration is how farmers are going to fund their income in later life. The good news is an increasing number of farmers have some financial security in the form of pensions, investments or savings.
Over the past four years, the percentage of farmers with pensions has increased from 66% to 77%, and pensions have been identified by farmers as one of the most important financial management priorities.
Sean explained: “An increasing number of farmers are investing in pensions.
“Pensions can 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.
“Seeking specialist advice from financial advisers with rural expertise can help farmers navigate those transitions.”