Paying Lump Sum into Pension later in life...

DE_612183

dunstonh said:

When you say dividends and salary of around £10k, does that mean you have a limited company?  If so, your contribution allowance is higher if you make company contributions.  

If the money is held personally, you just draw less in dividends and use the personal money.  And then get the company to pay into the pension instead.

So what you are saying is that if we draw say £4k per month in dividends - instead of drawing that I use £4k per month of the £70k, and then use the £4k left in the business to pay into the stakeholder scheme...?

NoMore

As I said originally the devils in the details, this does change your picture some what, but as I am no expert on employer contribution via ltd company, I will leave any further advice to those in the know.

dunstonh

Dave46049 said:

dunstonh said:

When you say dividends and salary of around £10k, does that mean you have a limited company?  If so, your contribution allowance is higher if you make company contributions.  

If the money is held personally, you just draw less in dividends and use the personal money.  And then get the company to pay into the pension instead.

Yes, I have a Ltd Co. Both myself and wife are employees and we boyth pay into a workplace pension scheme ( as employer and employee )

That suggests you employ people as shareholding directors are not required to operate a workplace pension unless they have employees.  e.g. if you are 50/50 shareholding directors don't need a workplace pension unless there is employees on top of that.

So what you are saying is that if we draw say £4k per month in dividends - instead of drawing that I use £4k per month of the £70k, and then use the £4k left in the business to pay into the stakeholder scheme...?

Stakeholders are old hat and can usually be improved upon.But putting that aside for now.....

You can pay £40,000 a year each into the pension (minus any other contributions) as employer contributions.  You also have past unused allowances available as well.   

If you have the money already in the business, you can pay in money from the company.   And reduce your draw in dividends.  So, on your example of £4000per month as employer contributions means you don't draw £4000 in dividends.  You have less income but use £4000 (or net equivalent) of the £70k to make up the difference.   Your tax cost will go down as dividends are not a business expense but pension contributions are.  So, lower corporation tax.    You will also pay less dividend tax as you are getting the money out of the company in a more tax efficient way.

DE_612183

so if "my company" pays in £4k per month into my pension - do I also get the 20% tax releif as well?

Thrugelmir

Dave46049 said:

so if "my company" pays in £4k per month into my pension - do I also get the 20% tax releif as well?

Employer contributions receive no tax relief. Your company is able to offest the contributions made against Corporation tax though as an allowable expense. Check the annual contribution limit rules carefully. As £48k in itself is potentially above them. 

dunstonh

As Thrugelmir says, your Corporation bill is reduced and you get money out of the company with no income tax or dividend tax.   
Also, if you haven't used the £40k pension allowance each year, directors making employer contributions can go above the £40k limit even though they don't have the wages to support it.

Company directors really benefit from the pension wrapper.