Directors Pensions

[NordicCrankShaft]

I'm looking to start putting money into a directors pension, my year end accounts are due November (as this is when the limited company was started last year) so ideally want to start doing it before that. My understanding is I can put as much as I want into it as long is it doesn't go over the lifetime allowance?
I wouldn't be making regular monthly contributions but more wanting to put in a lump sum every now and then where I see fit and where I can see a flurry of cash flow coming into the linited company.

Anyone have any suggestions on providers? Keep seeing a company called Penfold about a lot.

[Phooey]

I currently do exactly what you are planning to do and use Intelligent Money (top of forum). Deposits are quick and easy and all certificates (which you need) are downloadable via the account page. Send them an email or ask in the forum^^^

[craig1912]

NordicCrankShaft said:

I'm looking to start putting money into a directors pension, my year end accounts are due November (as this is when the limited company was started last year) so ideally want to start doing it before that. My understanding is I can put as much as I want into it as long is it doesn't go over the lifetime allowance?
I wouldn't be making regular monthly contributions but more wanting to put in a lump sum every now and then where I see fit and where I can see a flurry of cash flow coming into the linited company.

Anyone have any suggestions on providers? Keep seeing a company called Penfold about a lot.

This might help but I’m not sure if you mean lifetime allowance as you won’t know if you are over or under until you retire.

https://www.unbiased.co.uk/life/small-business/con...

[Seventy-Eight]

You are restricted to £40k per tax year, but can utilise any unused allowance in the previous 3 tax years. This £40k annual allowance can be reduced if your income hits a certain level (around £225k I think).

[Kickstart]

Seventy-Eight said:

You are restricted to £40k per tax year, but can utilise any unused allowance in the previous 3 tax years. This £40k annual allowance can be reduced if your income hits a certain level (around £225k I think).

Not that it’s relevant to me but if the company gave a generous final salary pension presumably the company would need to chuck in a lot more than £40k per year

[grahamm]

I use A J Bell whose charges are low and seem easy to use.

[craig1912]

Kickstart said:

Not that it’s relevant to me but if the company gave a generous final salary pension presumably the company would need to chuck in a lot more than £40k per year

Not applicable as the company are funding the scheme, not individual “pots”

The £40k limit is only for tax relief. You can put whatever you want into an individual scheme but tax relief is limited to the higher of 100% of your UK taxable earnings (max £40k) or £3,600.

https://www.gov.uk/government/publications/rates-a...

[nickfrog]

Yes no limit as the benefit is that it reduces profit and therefore Corporate tax. But obviously I would first make sure that I max out on the £40k with higher relief.

[Snozzer]

I use St James Place, and that's worked quite well for me. If I were to do it again, I'd do a SIPP with Fidelity.

[OddCat]

craig1912 said:

Not applicable as the company are funding the scheme, not individual “pots”

The £40k limit is only for tax relief. You can put whatever you want into an individual scheme but tax relief is limited to the higher of 100% of your UK taxable earnings (max £40k) or £3,600.

Eh? Surely (ignoring any Carry Forward) contributions in excess of £40,000 in any tax year will attract an Annual Allowance Charge penalty ?

"The annual allowance limit for the current tax year is £40,000. This limit includes all your contributions, tax relief and employer contributions across all your pension arrangements. It doesn’t include your State Pension. Contributions over this limit will result in a tax charge, known as the annual allowance charge"

If this were not the case, anyone could put hundreds of thousands of pounds straight into pensions to avoid IHT !

Edited by OddCat on Friday 9th September 13:18

[craig1912]

OddCat said:

Eh? Surely (ignoring any Carry Forward) contributions in excess of £40,000 in any tax year will attract an Annual Allowance Charge penalty ?

"The annual allowance limit for the current tax year is £40,000. This limit includes all your contributions, tax relief and employer contributions across all your pension arrangements. It doesn’t include your State Pension. Contributions over this limit will result in a tax charge, known as the annual allowance charge"

If this were not the case, anyone could put hundreds of thousands of pounds straight into pensions to avoid IHT !

Edited by OddCat on Friday 9th September 13:18

My post is referring to final salary schemes where there are no individual pots and the benefit is based on a percentage of salary with a maximum of normally two thirds of salary. The contributions from an employer could be nil if fund is massively overfunded or it could be 200% of salary if underfunded.
No point in putting hundreds of thousands of pounds in if, you don’t get tax relief and it is then taxed on the way out at the same rate as IHT but as I said there is no limit to how much you can put in.

I did link to the Gov site which gives all the info.

Edited by craig1912 on Friday 9th September 14:06

[nickfrog]

The way I understand it is that OP is getting his business to make contributions. So that the business saves CT. I might have got that wrong though.

[OddCat]

craig1912 said:

My post is referring to final salary schemes where there are no individual pots and the benefit is based on a percentage of salary with a maximum of normally two thirds of salary. The contributions from an employer could be nil if fund is massively overfunded or it could be 200% of salary if underfunded.

No point in putting hundreds of thousands of pounds in if, you don’t get tax relief and it is then taxed on the way out at the same rate as IHT but as I said there is no limit to how much you can put in.

I did link to the Gov site which gives all the info.

.....but you said "The £40k limit is only for tax relief. You can put whatever you want  into an individual scheme"

If you die under age 75 with £1 million in a pension pot it will pass TAX FREE to your beneficiaries. So, if you found you were dying at age 70, under your understanding you could put lots of money that might otherwise be subject to IHT into a pension.

Not to worry. Clearly neither of us are Financial Advisers so maybe a real one will come along soon and clarify....

[craig1912]

OddCat said:

.....but you said "The £40k limit is only for tax relief. You can put whatever you want  into an individual scheme"

If you die under age 75 with £1 million in a pension pot it will pass TAX FREE to your beneficiaries. So, if you found you were dying at age 70, under your understanding you could put lots of money that might otherwise be subject to IHT into a pension.

Not to worry. Clearly neither of us are Financial Advisers so maybe a real one will come along soon and clarify....

Apologies I misread your response. It still doesn’t change the fact that you can put in as much as you want. From the gov website

“There’s no limit on the amount that an individual can contribute to a registered pension scheme. If you’re a UK resident aged under 75 you may receive tax relief on your contributions to registered pension schemes.

Tax relief is limited to relief on contributions up to the higher of:

- 100% of your UK taxable earnings
- £3,600

Only the spouse or civil partner can inherit your pension tax free and I believe there are some “complex” rules around contributions when you know you are going to die.

[MaxFromage]

craig1912 said:

Only the spouse or civil partner can inherit your pension tax free

That's incorrect I'm afraid. The rules are very complex and depend on a number of factors to determine whether the pension is taxable or not.

[BenB91]

Some of the comments on here show that a little bit of knowledge is very dangerous. I suggest you speak to an IFA to get informed advice.

[tighnamara]

BenB91 said:

Some of the comments on here show that a little bit of knowledge is very dangerous. I suggest you speak to an IFA to get informed advice.

^^^^ this
OP, post on the IM pension topic at top of this finance page and also have a no tied conversation with IM.

Nik, Julian and and his team are easy to talk to with no expectations of investing with them.

This will give you a good understanding on what you can / can’t do or what may not be tax efficient.

Anyway get someone with knowledge to advise ASAP.

Edited by tighnamara on Saturday 10th September 08:35

[OutInTheShed]

If you look at the HL website, there is lots of info on there.
Also, a lot is there, direct from the horse's mouth on the HMRC website.

I used to just make an employer contribution to my personal SIPP when convenient. I don't think I ever maxed out the £40k in one year.
Fill in a form, send it with a cheque in the old days.

Not sure if you have to be a PAYE employee of the company rather than just a director?