Think Tank

Succession in farming: What concerns do the next generation of farmers have?

Succession in farming: What concerns do the next generation of farmers have?

22nd June 2019

Everyone always thinks of the ‘next generation’ as being the bright young things, but in rural businesses the reality can be very different. Some of our ‘NextGen’ farming clients are well into their 50’s, and have yet to play a major role in making the key decisions which affect the farming business.

This is an important consideration, as there will be lots of different life stages for farmers as they progress through to the next generation. Below are just a few of the key concerns that our Millennial or NextGen farmers face, and some of the steps we can help them take to address these issues.


NextGen clients often don’t own their own property

They live on the farm, or in a property provided by the farming business, with the property still owned by their parents. Often most, if not all, of the bills for the property are also paid for by the business.

This can potentially have a large financial impact on the family, particularly if the person working on the farm dies before inheriting any part of that property. The family they leave behind are reliant on the goodwill of the existing farming partners to be able to continue to live in what they have regarded as their family home. They may also be reliant on the farming business to provide them with an income.

This situation can also have a number of financial implications for the farming business as a whole. The partners may feel that they have a moral, if not legal, obligation to continue to provide a property and income for their extended family. However, they may also need to employ someone to do the role of the deceased. So would the business support two households, rather than the one? And what would happen if the surviving spouse met a new partner? Would the family still wish to support the living accommodation requirements with a new person installed?

One measure that could make a significant difference in this situation is to put life assurance in place as early as possible. The family would then know that, if the worst happens, a lump sum would be available to the survivor to assist with living accommodation, income, or both. Check out our other post for more information – “Farming succession planning & property: How to avoid disputes”.

The next generation may want to make significant changes to the business

It may be that the farm will need to be split, so that two siblings, or cousins, can each have their own separate unit to grow and develop. This may require funds, or funding, and so it is very sensible for the NextGens to build up a pot of cash with which to assist with this future goal.

Quite often this can be done through a pension fund, to benefit from the potentially higher rate tax relief, as well as building a fund which can be used to purchase commercial property (such as agricultural land or buildings). The pension fund can also borrow in its own right, thus building a further source of finance if the purchase is substantial.

Alternatively, this could be done through ISA investments or other savings plans.  Alternatively the farm can be split notionally on the balance sheet, so that each family knows what is actually owned by them, but they continue to farm together as one, recognising that the total sum is better than two parts.

The key here is to talk about these ideas early with your accountant and financial planner, and identify a way forward – perhaps in conjunction with a cashflow projection – which can help you to achieve your aspirations for yourself and the farming business.

They also worry about their own children

While they worry about what their own future will be, they also worry about their children’s future and how they will provide for them. This can be difficult to visualise when the immediate future is uncertain. However, we do find that the new Millenial or next generation of farmers are acutely aware of the need to plan, and are often sorting out their children’s future before they are completely confident about their own!

Good financial planning can make a big difference to your long-term quality of life, and while NextGens may not be making the key farming business decisions, they can make the key financial decisions about their own future.

While not all life goals have a financial implication, many do, and the choices you make in the early part of your adult life will probably have the biggest impact.

To find out more about financial planning for the NextGens of the farming sector, please do contact us.

"Good financial planning can make a big difference to your long-term quality of life."