Silver start-ups have been urged to heed some golden rules before setting up in business.

Nick Brook, of TaxAssist Accountants in Huddersfield offered advice after research by wealth manager Axa showed that one in 10 people aged over 55 are considering drawing on their pension pot to start their own business.

Axa also found that one in 20 people polled plan to use their 25% tax-free lump sum to set up a business – with choices ranging from tea shops and art galleries to manufacturing and computer repairs.

Mr Brook said: “The new pension reforms, which mean that people aged 55 and over with a defined contribution pension can now choose to take their money rather than buy an annuity, are encouraging a new generation of later-life entrepreneurs.

“But we’re urging these so-called silver start-ups to obey some golden rules to help protect their hard-earned retirement savings.

“Remember that only the first 25% of any pension pot draw-down is tax-free, so factor in paying income tax on the rest and avoid pushing yourself into a higher tax bracket

“Consider bite-size chunks of funding to gradually build your business, add necessary equipment and support cashflow – each draw-down then qualifies for 25% tax free.

“Work with your advisers to produce a clear business plan and cashflow forecast, which includes all living costs and targets payback times on the investment

“And consider part-funding from other sources, such as the Enterprise Finance Guarantee Scheme, to safeguard some of your retirement savings.”