Company director and pension contribution best practise

marbic

Hi All

New poster, so please go easy...
A bit of back ground, I co-own a business that after a number of years has finally started to turn a regular profit. Both me and my business partner don't have any pensions and are early 40's. The company has recently auto enrolled all staff onto a work place pension scheme with Nest.

My question is what would be the most tax efficient way for the two directors to increase our pension contributions? Through Nest or by setting up a SIPP? Or another option?....

Let me know what info I have missed out or if this is a silly question....

dunstonh

My question is what would be the most tax efficient way for the two directors to increase our pension contributions? Through Nest or by setting up a SIPP? Or another option?....

Tax efficiency is not affected whether you use NEST, a SIPP or other pension option. It isnt the provider or the pension type that matters. As long as the pension provider accepts employer contributions (which most do) then its fine.

marbic

Thanks for your answer. If we use Nest, can we set it up so the business matches the overpayment contributions?

dunstonh

marbic wrote: »

Thanks for your answer. If we use Nest, can we set it up so the business matches the overpayment contributions?

As directors, you should only be making employer contributions. Not personal ones.

TheTracker

The business can directly contribute to your pension any amount it wants to, without you having to make any other personal contribution.

By the way, this isn’t a loophole. Anyone in PAYE employment can have their employer do this if mutually agreed. Eg you could do the same for any employee of yours. In other words you don’t need to be a director. You could directly make pension contributions to an employed wife similarly, if your company agrees.

The business treats the pension contribution as a direct expense before tax. It saves employers NI. When we hear of ‘matched contributions up to 6%’ all the employer is doing is sharing some of the NI it would have paid, so don’t go overboard on estimating employer altruism.