Pension For Ltd Co Director

[mikef1]

HI

Looking for a pension recommendation.

I have a Ltd Co that in 3 years time will be in a position to make the full annual contribution (40k per year I believe?)

It may also be in a position to make a back payment (3 years I believe ?) but only if I have had the product for these years?

If the above is correct can I open a pension now and pay a token amount yearly say £1k and in 3 years time funds permitting top up the pot with 3 years of back payments?

If so can someone recommend an easy low fee product that will be suitable for this.

thanks

[trickywoo]

Your plans are the same as what I actually did although as with everything my top up plans weren’t possible due to lack of cash in the end.

Vanguard is the usually recommended cheap platform and funds.

Keep a close eye on the upcoming budget as they could well hammer small companies again. I’m still bitter from the dividend tax changes which came in just at the point I would have benefited most.

[mikef1]

Thanks I guess what fund is irrelevant just now until the time comes to put in a lump sum then even if there are transfer fees they will be low as the pot will be small.

[red_slr]

I use Vanguard.

+ves
Cheap
Easy to use and set up
Access to Vanguard funds cheaply

-ves
You still cant set up monthly automatic payments from a LTD
You can only buy Vanguard funds

HTH!

[Sy1441]

I’m in the same situation so interested in the replies. I have a current pension that was purely set up as my accountant was doing it for our employees so does that tick the box?

[cloud_dog]

mikef1 said:

HI

Looking for a pension recommendation.

I have a Ltd Co that in 3 years time will be in a position to make the full annual contribution (40k per year I believe?)

It may also be in a position to make a back payment (3 years I believe ?) but only if I have had the product for these years?

If the above is correct can I open a pension now and pay a token amount yearly say £1k and in 3 years time funds permitting top up the pot with 3 years of back payments?

If so can someone recommend an easy low fee product that will be suitable for this.

thanks

I think you are conflating two distinct areas.

Carry forward is available to individuals to utilise, as you describe. Employer's are limited to the £40k AA (with a caveat). As you appear to already know, the most effective way of getting money out of a business and in to your personal hands is via an employer contribution in to your personal pension.

My understanding is that the carry forward regulation is always based on you having sufficient personal earnings in the current FY to support the additional contribution. So, for the company to pay £120k you would have needed a salary (taxable earnings) of £120k in the FY.


https://www.pensionsadvisoryservice.org.uk/about-p...

If you are self-employed and run your own business

If you run your own business, the situation is a bit different. One of the advantages of being an incorporated trader is the ability to switch contributions between the individual and the company depending on nature and level of income from the business.

If the individual wants to make the contribution themselves with full tax relief on it, they need sufficient earned income (i.e. salary – dividends do not count for this purpose) to cover the contribution.

The company is able to make whatever contribution it likes to the employee’s pension fund, regardless of the amount of salary/ dividends the employee receives.

It is important that correct legal form is followed here - the company is not making the contribution on behalf of the employee (in which case it would be treated as an employee contribution) but is making an employer contribution in its own right.

As an employer contribution to a registered pension scheme, it does not count towards the employee’s taxable remuneration from the company. The contribution does count towards the employee’s annual allowance but the individual can benefit from the carry forward rules.

[trickywoo]

cloud_dog said:

My understanding is that the carry forward regulation is always based on you having sufficient personal earnings in the current FY to support the additional contribution. So, for the company to pay £120k you would have needed a salary (taxable earnings) of £120k in the FY.

The company is able to make whatever contribution it likes to the employee’s pension fund, regardless of the amount of salary/ dividends the employee receives.

It is important that correct legal form is followed here - the company is not making the contribution on behalf of the employee (in which case it would be treated as an employee contribution) but is making an employer contribution in its own right.

You've confused yourself there, never mind everyone else. Your first paragraph is, I believe incorrect, and you then contradict it with the rest that I have quoted and you copied and pasted from the link you gave.

[cloud_dog]

trickywoo said:

You've confused yourself there, never mind everyone else. Your first paragraph is, I believe incorrect, and you then contradict it with the rest that I have quoted and you copied and pasted from the link you gave.

Care to clarify? Save me repeating an incorrect understanding.

Ordinarily the AA for company contributions is £40k pa. This, however can be exceeded if the person has suitable personal earnings (said caveat), and is referenced in the last emboldened statement in my post. It is unusual for a director of their own limited company to have PAYE earnings much above the LEL usually, although this is a personal arrangement and so can be of any value. The question then becomes how does the OP, who wishes to contribute 3 years worth of company contributions (£40k for each year) undertake that.

[trickywoo]

cloud_dog said:

Care to clarify?

Personal income is irrelevant to company contributions. Using the carry forward doesn’t change that.