Limited Company. Open a pension scheme help

Limited Company. Open a pension scheme help

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knitware

Original Poster:

1,473 posts

193 months

Monday 22nd October 2018
quotequote all
Apologies that for some this question may seem obvious but it's new to me!
I have a limited company and I would like to move funds from the company into a pension, this is where I need a few pointers.

1) How do I find the best pension company, do I use a site like 'money expert' and apply, is the application the same as an individual applying or as a company do I need a specialist company pension scheme even though it's just me in the company? Could you pop a link to an example of a pension provider : )

2) How do I physically move the money form the business account to the pension account, it a simple case of starting a monthly direct debit to the pension account and claim as an expense?

3) Is starting a pension as simple as the above 2 questions?

4) I have 2 other company pensions, can I lump together?

Thank you.


PurpleMoonlight

22,362 posts

157 months

Monday 22nd October 2018
quotequote all
Seek independent financial advice.

JulianPH

9,917 posts

114 months

Monday 22nd October 2018
quotequote all
knitware said:
Apologies that for some this question may seem obvious but it's new to me!
I have a limited company and I would like to move funds from the company into a pension, this is where I need a few pointers.

1) How do I find the best pension company, do I use a site like 'money expert' and apply, is the application the same as an individual applying or as a company do I need a specialist company pension scheme even though it's just me in the company? Could you pop a link to an example of a pension provider : )

2) How do I physically move the money form the business account to the pension account, it a simple case of starting a monthly direct debit to the pension account and claim as an expense?

3) Is starting a pension as simple as the above 2 questions?

4) I have 2 other company pensions, can I lump together?

Thank you.
1) What do you want from the pension? This will go a long way to answering your first question. Obviously you are looking for tax efficient retirement planning, but do you have large sums in the company you wish to shield from corporation tax (then a SSAS may be best), smaller sums (up to £40k) that you equally want to shild from Corporation Tax every year (in which case a SIPP may be best), the ability for your pension to loan your company money (SSAS)/purchase your commercial property (SIPP or SSAS), etc.

2) Your company can make gross (before income tax and NI payments) pension contributions on your behalf via lump sums or direct debits. Such payments are an expense against corporation tax. You do not need a 'Company Pension' for this, you can use a personal pension (which includes SIPPs).

3) Yes it is very simple to open a personal pension (including SIPPs) that your company can pay into. A SSAS takes more time as each one needs to be verified by HMRC and these are company pensions that you are a member of (rather than a personal pension your company contributes to.

4) No. All three companies could contribute to your personal pension/SIPP, but you could not open a company pension (SSAS) for all three companies unless you set up a holding company for all three and the holding company sets up the SSAS. This becomes more complex.

From the way you phrased your original question I agree with Purple that you should seek financial advice from a regulated financial adviser. However, if you let us know what it is you want to achieve then the options could become quite simple and you could do this without having to pay for such advice.

knitware

Original Poster:

1,473 posts

193 months

Monday 22nd October 2018
quotequote all
Julian,
Perfect thank you. I have previously sought independent advice, a while ago, but thought to cast a question to help me understand better the options. The SIPP was discussed as the option, just need to find the best provider. Thank you for the answer to 4!
I shall look tonight for a SIPP. The independent advice concluded that if I wanted to draw a pension of £35k at 67 years old I needed a fund of £1million, so I need to invest £2k a month.


JulianPH

9,917 posts

114 months

Tuesday 23rd October 2018
quotequote all
knitware said:
Julian,
Perfect thank you. I have previously sought independent advice, a while ago, but thought to cast a question to help me understand better the options. The SIPP was discussed as the option, just need to find the best provider. Thank you for the answer to 4!
I shall look tonight for a SIPP. The independent advice concluded that if I wanted to draw a pension of £35k at 67 years old I needed a fund of £1million, so I need to invest £2k a month.
Hi John

No problems. A SIPP could be a good option if your main driver is retirement saving with the added benefit of being able to hold your business premises in your pension at a future date.

All company contributions are made before any tax or NI and can be offset against corporation tax.

If you aren't bothered about the future property holding in your pension then any SIPP or flexible pension would work for you. You want to keep costs low but the cheapest is not always the best if the service and administration is not very good.

If future property ownership is important to you (basically your SIPP can buy your business premises and your business pays rent directly to your SIPP) you may want to look for a provider that can offer you a low cost SIPP now with the option to set up property later.

There are loads of options available to you, PM me if you want my personal opinion on any of them so I don't break any rules here if I have a highly negative view on any of them!

NicoG

640 posts

208 months

Tuesday 23rd October 2018
quotequote all
JulianPH said:
Hi John

No problems. A SIPP could be a good option if your main driver is retirement saving with the added benefit of being able to hold your business premises in your pension at a future date.

All company contributions are made before any tax or NI and can be offset against corporation tax.

If you aren't bothered about the future property holding in your pension then any SIPP or flexible pension would work for you. You want to keep costs low but the cheapest is not always the best if the service and administration is not very good.

If future property ownership is important to you (basically your SIPP can buy your business premises and your business pays rent directly to your SIPP) you may want to look for a provider that can offer you a low cost SIPP now with the option to set up property later.

There are loads of options available to you, PM me if you want my personal opinion on any of them so I don't break any rules here if I have a highly negative view on any of them!
Hello Julian

This is very interesting, considering my own thread in this section.
So in a nutshell, If I don't need my Ltd Co BTL to pay me an income, I can divert 100% of profit (up to £40K minus other pension contribution from PAYE job )into a SIPP and completely legally make zero profit?

This would mean I could potentially be ploughing an extra £15-20K / annum into a SIPP without any deductions whatsoever, with my ltd co owning an asset (BTL) that will (in time if not immediately... ) increase in value and can then be bought by my SIPP?

Nick.

ps - what's the current pool temp?


JulianPH

9,917 posts

114 months

Tuesday 23rd October 2018
quotequote all
NicoG said:
Hello Julian

This is very interesting, considering my own thread in this section.
So in a nutshell, If I don't need my Ltd Co BTL to pay me an income, I can divert 100% of profit (up to £40K minus other pension contribution from PAYE job )into a SIPP and completely legally make zero profit?

This would mean I could potentially be ploughing an extra £15-20K / annum into a SIPP without any deductions whatsoever, with my ltd co owning an asset (BTL) that will (in time if not immediately... ) increase in value and can then be bought by my SIPP?

Nick.

ps - what's the current pool temp?
Hi Nick

I hope life has been treating you well since we last met!

That pretty much sums it up. The only point I would make is your BTL would need to be a commercial property for your SIPP to buy it, not residential.

Pool temp is coming up as the weather gets cooler. 33 degrees right now on its way up to its winter 35 degree level!

Cheers mate smile

Jockman

17,917 posts

160 months

Tuesday 23rd October 2018
quotequote all
NicoG said:
Hello Julian

This is very interesting, considering my own thread in this section.
So in a nutshell, If I don't need my Ltd Co BTL to pay me an income, I can divert 100% of profit (up to £40K minus other pension contribution from PAYE job )into a SIPP and completely legally make zero profit?

This would mean I could potentially be ploughing an extra £15-20K / annum into a SIPP without any deductions whatsoever, with my ltd co owning an asset (BTL) that will (in time if not immediately... ) increase in value and can then be bought by my SIPP?

Nick.

ps - what's the current pool temp?
Make sure you put the commercial property in the Sipp BEFORE it increases in value smile

Silverage

2,034 posts

130 months

Thursday 25th October 2018
quotequote all
This sounds like something I should have done a while ago.

Can I just clarify that the corporation tax advantage comes from the pension contribution reducing the company’s profit and therefore its corporation tax liability? So, say a company makes £100,000 profit, CT would usually be £20,000, but if £40,000 were paid in pension contributions, profit would reduce to £60,000 and CT drop to £12,000?

JulianPH

9,917 posts

114 months

Thursday 25th October 2018
quotequote all
Silverage said:
This sounds like something I should have done a while ago.

Can I just clarify that the corporation tax advantage comes from the pension contribution reducing the company’s profit and therefore its corporation tax liability? So, say a company makes £100,000 profit, CT would usually be £20,000, but if £40,000 were paid in pension contributions, profit would reduce to £60,000 and CT drop to £12,000?
That is exactly the principle. It is incredibly tax efficient.

turbospud

500 posts

238 months

Friday 16th November 2018
quotequote all
JulianPH said:
That is exactly the principle. It is incredibly tax efficient.
can the company pay into a pension for previous years and if so how many

PurpleMoonlight

22,362 posts

157 months

Friday 16th November 2018
quotequote all
turbospud said:
can the company pay into a pension for previous years and if so how many
You can carry forward any unused annual allowance from the three previous tax years.

LivingTheDream

1,753 posts

179 months

Friday 16th November 2018
quotequote all
PurpleMoonlight said:
turbospud said:
can the company pay into a pension for previous years and if so how many
You can carry forward any unused annual allowance from the three previous tax years.
Couple of caveats to that

1. The scheme must have been in place for those years

2. Carry forward only applies once the current years allowance is used up - therefore you pay £40k into this years, then top up previous years

turbospud

500 posts

238 months

Friday 16th November 2018
quotequote all
LivingTheDream said:
Couple of caveats to that

1. The scheme must have been in place for those years

2. Carry forward only applies once the current years allowance is used up - therefore you pay £40k into this years, then top up previous years
ah,so its not a case of opening a sipp and putting 3 previous years company profits up to 40k in

PurpleMoonlight

22,362 posts

157 months

Friday 16th November 2018
quotequote all
LivingTheDream said:
Couple of caveats to that

1. The scheme must have been in place for those years

2. Carry forward only applies once the current years allowance is used up - therefore you pay £40k into this years, then top up previous years
Almost.

You just need to be a member of a pension arrangement in the previous tax years (even if no contributions were paid to it), not necessarily the one you are intending contributing to.

PurpleMoonlight

22,362 posts

157 months

Friday 16th November 2018
quotequote all
turbospud said:
ah,so its not a case of opening a sipp and putting 3 previous years company profits up to 40k in
Do you have any existing pension arrangements?

turbospud

500 posts

238 months

Friday 16th November 2018
quotequote all
PurpleMoonlight said:
Do you have any existing pension arrangements?
yes but not a sipp

PurpleMoonlight

22,362 posts

157 months

Friday 16th November 2018
quotequote all
turbospud said:
yes but not a sipp
You should be okay then, but check with your intended SIPP provider. Contributions in excess of the annual allowance get reported to HMRC!

LivingTheDream

1,753 posts

179 months

Saturday 17th November 2018
quotequote all
PurpleMoonlight said:
LivingTheDream said:
Couple of caveats to that

1. The scheme must have been in place for those years

2. Carry forward only applies once the current years allowance is used up - therefore you pay £40k into this years, then top up previous years
Almost.

You just need to be a member of a pension arrangement in the previous tax years (even if no contributions were paid to it), not necessarily the one you are intending contributing to.
Didn't know that, thanks.

Jockman

17,917 posts

160 months

Sunday 18th November 2018
quotequote all
PurpleMoonlight said:
You should be okay then, but check with your intended SIPP provider. Contributions in excess of the annual allowance get reported to HMRC!
Do they?