Farmers should consider dipping into their pension pots to help them cope with the cash flow crisis that is hampering their industry, accountants have advised.
New pension freedoms which allow savings to be accessed like ordinary bank accounts could offer a tax efficient way of helping farms that are struggling to break even, they said.
The advice comes amid a perfect storm of low farm gate prices, a weak euro against the pound and delays to EU farm support payments, which leaves many farms struggling to make a profit.
Chartered financial planner, Suzanne Williams, of accountancy firm Old Mill, said: “Farmers may already have approached their bank to secure additional lending, and will certainly have already considered how to reduce outgoing payments, but there are other alternatives.
“Since the pension rules changed in 2015 it’s been possible to access unlimited funds from your pension if you’re over the age of 55. This means if you’re currently taking no or very little income from your business, it may be possible to take money from your pension very tax efficiently.”
An alternative, she said, was to use a self-invested personal pension fund to buy land from the farm, which could lead to lower Income Tax.
Some farmers are already using their pensions amid the current crisis. At an industry march through London this week, arable farmer Jackie Buckley, 67, of Pontefract, told The Yorkshire Post she had to, as the wheat price is almost 30 per cent a tonne down.
While pensions could offer a lifeline, finance expert Ms Williams warned farmers to take professional advice first, saying: “This is especially true when it comes to using your pension, as its ultimate purpose is to provide an income in retirement.”
Farming Minister George Eustice admitted that delays to distributing EU support money, because of government administrative IT failures, had compounded farmers’ problems.
At Wednesday’s Efra Select Committee hearing, he said: “It’s meant that farmers have had to ask their bank for an extension of overdraft facilities and to ask for, because we are in a difficult situation anyway, repayment holidays on loans for instance.”
He said he regularly updates banks on progress of payments and that farmers had been sent letters to show banks that they had a payment pending.
A government hardship fund has seen around £5m shared between more than 300 farmers since Christmas.
Efra committee member Rishi Sunak, Conservative MP for Richmond, acknowledged the difficulties farmers were facing, saying: “That’s why I have pressed both the Rural Payments Agency boss (Mark Grimshaw) and the Farming Minster in recent weeks to do everything possible to speed up BPS (Basic Payment Scheme) payments.”
He urged caution about farmers using pension pots, insisting that the Government’s hardship fund was working.
He encouraged farmers to apply to the fund, through the Farming Community Network (FCN) and other farm industry charities. Farmers in extreme diffiulties could receive up to 60 per cent of their expected final BPS payment.
Any farmers wanting help and advice can contact the Rural Payments helpline on 03000 200 301.