Retirement Planning for Farmers


What happens if you’re an older farmer with a farm and land but without family to take over or the liquid means to transition into retirement?

Many of our farming clients continue to contact us to discuss funding for their diversification projects, but we’re increasingly hearing from older farmers; those who are past retirement age but still farming on their own farm.

They don’t want to come out of farming quite yet because of potential upcoming changes to the Basic Payment Scheme – where there’s a possibility of being able to draw down seven years of payments in a one-off lump sum. While that’s not confirmed, and the tax implications unknown, it appears to be keeping some older farmers hanging on in there with the farm.

But their life isn’t without pressures. Particularly from the bank. A common scenario is where the farm’s not been generating good profit, the overdraft has become uncomfortable and there isn’t the cash to buy somewhere else to live if they do come out of the farm.  But perhaps a cottage or bungalow has just come up for sale in the village and, having lived and farmed locally their whole life they’re part of the social fabric, they don’t want to miss the opportunity of securing a local home for their retirement.

The problem is they don’t have any cash. However, they’re sitting on an asset of £2.5m consisting of unencumbered farmhouse and land.  With the right level of security, FOLK2FOLK could help them refinance the bank overdraft, alleviating that pressure, and finance the purchase of the new house in the village. Perhaps it could then be let on an assured shorthold tenancy and the rent used to service the loan.

Within our loan time-frame of maximum five years, they could stay where they are on the farm and wait to see what happens with the Basic Payment Scheme and whether a windfall materialises.  When they decide to sell their farm, the sale income will pay off the loan and they can move into their new house in the village.  With the considerable funds left over they could go on to become a FOLK2FOLK Lender which would provide them with a monthly income of typically 6.5% p.a. to supplement their retirement.

If this scenario sounds familiar to you and you want to chat through how a FOLK2FOLK loan or investment could help, please Talk To Us.


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