Executive Pension plans

If you are an owner-director or an employer wishing to provide pension enhancements for senior employees, then an executive pension plan (EPP) could be an ideal vehicle to provide various pension benefit solutions. (non senior personnel are also eligible)

Saving quickly for old age
EPPs can also be a good option if you need to save quickly for old age. Employees who are sufficiently senior in their company may be able to make up a lot of lost ground by joining an EPP. The schemes can be tailored to suit individuals or small groups and, while employees' contributions are limited to the usual maximum of 15% of earnings, companies are often prepared to make very generous contributions on behalf of executives or senior staff. The only difficulty is that the Inland Revenue has now become less relaxed about employers who make huge contributions to EPPs.

With Executive pension plans the usual rules on annuities and tax-free lump sums on retirement apply.

As with other money purchase occupational schemes, EPPs are now allowed – but not compelled – to offer pension fund withdrawal.

For owner-directors, the executive pension plan can both fund a full pension entitlement and provide a tax-efficient method of remuneration. The plan's advantage is that the company must pay a contribution. Consequently, the company saves on employers' National Insurance, currently 12.2% on all remuneration, and benefits from tax relief on the contributions. And individual members can contribute up to 15% of their pensionable earnings.

The key difference between this type of scheme and, say, a personal pension scheme, is the contribution levels that the Inland Revenue allows. The Inland Revenue imposes an earnings cap on pensionable earnings. For the 2002/2003 tax year the cap is £97200 for those who joined their current scheme after 17 March 1997. This poses big problems for many firms with higher-paid employees.

The Benefits of EPPs
– Most major insurance companies have 'off the shelf' packages, which can be set up quickly and relatively cheaply.
– Owner-directors can fund a full pension entitlement and provide a tax-efficient method of remuneration.
– The company saves on employers' National Insurance, currently 12.2% on all remuneration.
– Contribution levels set by the Inland Revenue can be higher than with a personal pension.

If you would like to find out more information about EPPs or to review your existing arrangements, please E-mail , use our pension request form, or contact us on 08000 151613 today.

The past is not necessarily a guide to future performance. Levels and bases of, and reliefs from, taxation are subject to change. Tax reliefs referred to are those currently applying and their value depends on the circumstances of the individual investor or fund involved. The value of the units in these investments, as well as the income from them, can fall as well as rise. These investments are intended as long-term investments. If you withdraw from these investments in the early years, you may not get back the full amount invested.