Just
like other employees, business owners and directors can use occupational
pension arrangements to ensure that their personal affairs are
structured as tax efficiently as possible. For example, a small
self-administered pension scheme (SSAS) allows a company to invest
in many areas, including commercial property, in order to build
a substantial portfolio of investments that can be used positively
by the company. |
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| Money
talks
Under pension legislation that came into force in April 2001,
the maximum allowable contribution to defined contribution pension
schemes, other than occupational schemes, can be based on the
tax year with the highest income in the last five tax years.
This applies to self-invested personal pensions (SIPPs), personal
pensions and stakeholder plans. It means that if your income
is made up of dividends and salary or bonuses, you only need
one high salary year in the previous five to maintain a high
level of pension investment. Under current proposals this facility
may end at the start of the 2005/06 tax year.
Greater choice
Most pensions only offer access to collective investment funds.
However, the more sophisticated pension investor may wish to
consider a SIPP, which allows you to bring in other investments
to benefit from pension tax breaks and tax-free growth within
your pension fund.
You can achieve even lower maintenance by choosing a pension
provider that offers a phasing service. This could mean, for
example, that you initially invest in a range of aggressive
(higher risk) funds, such as volatile Japanese and US stocks.
But in the five years running up to your retirement, you could
authorise your provider to reinvest your fund into successively
lower risk funds, so that your investments are totally in cash
when you collect your pension.
This is a very low-maintenance approach and reduces paperwork.
We can help you select a company that does not penalise you
for coming out early.
If
it has been a while since we reviewed your pension arrangements
and you would like to discuss this, please e-mail or contact
us for further information.
The amount that can be contributed into pension schemes
is subject to Inland Revenue limits. The Financial Services
Authority does not regulate taxation advice.
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to tackle your pension?
Occupational Pension Scheme
This is a company pension provided by an employer. The
benefit you receive on retirement may be linked to your
earnings (defined benefit) or how much money you have
put in (defined contribution).
Personal Pension/Stakeholder
Scheme
This is a defined contribution scheme where your final
pension depends on how well your pension provider has
managed your money and annuity rates at the time you take
the benefits.
Self-Invested Personal Pension
Known as a SIPP, this type of pension enables you to make
your own investment choices, which could include buying
a property to use as offices and then renting it back
to your company. Generally, you need to be making higher
contributions to take advantage of a SIPP.
Small Self-Administered Scheme
An employer's pension scheme, which can cater for a maximum
of less than 12 employees. You have options with this
scheme that would not be possible with an occupational
scheme, such as making a loan to your own business or
investing in your company's premises.
Executive Pension Plan
An occupational pension scheme for senior directors and
company executives, the advantage being that you can usually
arrange to make bigger contributions, making it suitable
for higher earners
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