Integrate your plans for retirement and succession

A financial analysis reveals that the balance sheet is in an excellent state, with a sound income statement and very low levels of debt. We advise him to issue private debt so as not to dilute the company’s capital, as that would further complicate the future handover to his managers. Moreover, low interest rates favour this kind of solution, with long-term repayment, given that the company is able to generate sufficient cash flow.

Almost a quarter of Swiss SME managers envisage selling their companies within the next five years

Lombard Odier’s Corporate Coverage team show the owner a selection of European investment funds specialised in this kind of financing. The business owner and his managers are thus able to select an offer that takes into account the company’s current development needs and the future management buyout.

Company succession is a key step for business owners, as they wish to reap as much benefit as possible from their work. The strength of our approach is that we offer holistic solutions which take account of all the factors relating to the client’s family, assets and business. As a result, we can set up appropriate, personalised management solutions.

Use the surplus cash on your company’s balance sheet to prepare for your retirement

While appraising the company’s financing, we also analyse the business owner’s financial situation in full. Some years prior to the handover – and prior to retirement – we discuss some strategic questions with him. How can I plan my retirement? How can I optimise my tax situation? How can I generate the earnings necessary to maintain my current lifestyle? Our experience has shown that business owners often see their personal wealth as deriving from the value of their company and the size of their shareholdings. At the same time, they frequently have only minimum pension cover, not realising how much such retirement provisions can boost their wealth.

Learning to see your pension as an integral part of your overall asset management is essential to preparing for retirement today. Asset managers regularly note that business owners tend to limit withdrawals from their company in order to avoid paying extra tax. As a result, many companies end up having unnecessary surplus cash on their balance sheets, which is not needed for operational purposes. This may have a negative impact on the company’s valuation when it is sold.

In this case, the significant cash flow is an additional difficulty in the transfer of the company to the managers.

Together with the client’s tax adviser, we examine his Pillar 2 cover and set up a Bel Etage solution for him and his management team. This helps to mitigate his tax liability while significantly increasing his retirement capital and allows him to play an active role in his supplementary pension provision. Effective asset allocation allows him to enhance the performance of his pension savings without changing his risk profile. Occupational pensions create value, with asset management becoming an integral part of our clients’ overall wealth.

As pension buy-ins are not permitted within three years of retirement, our middle-aged business owner realises that he doesn’t have much time left to set up the retirement savings he needs to maintain his lifestyle after transferring his company. Buy-ins are fully deductible from the insured members’ taxable income, and the money used to finance buy-ins is deducted from insured members’ taxable assets. Such buy-ins therefore contribute to the fiscally efficient overall management of the business owner’s assets, encompassing private assets, pension assets and company liquidity.

Retirement in the sun

The business owner and his spouse also tell us about their plans to retire in sunny Portugal. The country now offers the status of non-habitual tax resident, but a change of jurisdiction calls for a thorough study of the individual case. Any move abroad involves challenges not only at a personal level but also in terms of legal and tax considerations. Assets must be structured to take account of the laws and regulations in force in the business owner’s country of origin and country of destination. Our asset planning advisors outline both the advantages and the disadvantages involved in this kind of move. This allows the couple to make an informed decision.

According to Eurostat, nearly 3 million people move country every year in the European Union, an increase of 12% since 2013. In view of this longstanding trend, we have broadened our expertise of the main European jurisdictions. So if you decide to move abroad, we will structure your assets in accordance with the laws and rules in force in both your original place of residence and your new one.

As bankers, we understand your concerns. That’s why we have developed the expertise to meet your specific needs. We offer advice on personal asset structuring and management based on three elements: your company-related assets, your private assets and your pension assets. Moreover, our experts in wealth planning are on hand to advise you on how to transfer and sell a business, whether to a third party or a family member. To learn more about our expertise for business owners, please visit our dedicated page.

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter "Lombard Odier"). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document.

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