Less than half of farmers have a succession plan and the percentage has not risen in three years, according to a recent survey from the insurance branch of the National Farmers’ Union (NFU Mutual).
NFU Mutual’s annual Voice of the Farmer survey interviewed a sample of more than 1,700 farmers from across the UK and found that just 48% have a succession plan in place in 2023.
36% do not have a plan because they don’t think it’s relevant to them, while 16% said succession planning is relevant, but they haven’t got round to it yet.
Farming specialist at NFU Mutual, George Belcher, said farmers have found it tough to plan with certainty over the past few years.
“The post-Brexit transition in subsidies, rampant inflation, slow pace of farming policy, and changing prices to food, fertiliser and fuel have all impacted the ability to put in long-term business plans,” he said.
“Deciding who to hand the farm down to and how to do that drops down the priority list when there are more immediate needs to tackle.
“But even in tough environments, the importance of future-proofing the farm does not disappear.”
Belcher said, in some cases, these challenges will have triggered a need to start thinking about succession, but even those farmers who don’t believe a plan is relevant to them can put in a series of small simple steps to protect their farm.
Protecting agri businesses
NFU Mutual said farms without a natural successor can still protect themselves.
Chartered financial planner at NFU Mutual, 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 great risks of a business partnership is that one of the partners may die, with his or her share of the business passing to someone else. That person may have little interest in the business or – at worst – may be hostile to your objectives.”
Equally, McCann said, a partner who suffers a serious illness may 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,” he said.
“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.”
Financial security in later life
Another key consideration is how farmers are going to fund their income in later life, NFU Mutual said.
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, the rural insurer said.
“An increasing number of farmers are investing in pensions,” McCann said.
“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.”