Executive pension schemes

FireFury

I am one of the directors of a limited company, and I am currently paid through a combination of a normal PAYE salary and dividends. I am looking to have the company pay into my pension in a tax efficient way and our company account has advised that I should contact a pensions advisor and set up an "executive company scheme".

A lot of Googling has not given me any insight into the difference between an "executive" scheme and a normal pension. I have contacted a pensions advisor and his advice has been clear as mud. He says that payments into an executive pension by the company are an allowable expense and therefore would not attract corporation tax. However, as far as I understood, payments into any pension, as part of a remuneration package, are an allowable expense so I'm still unclear on how an "executive" pension scheme is different.

I have an existing SIPP, so is there any benefit in setting up an "executive" scheme instead of having the company pay directly into my SIPP?

Many thanks.

dunstonh

and our company account has advised that I should contact a pensions advisor and set up an "executive company scheme".

That is highly unusual.  Most directors would have an individual personal pension plan.

He says that payments into an executive pension by the company are an allowable expense and therefore would not attract corporation tax.

As do individual personal pensions.

 However, as far as I understood, payments into any pension, as part of a remuneration package, are an allowable expense so I'm still unclear on how an "executive" pension scheme is different.

You will need to ask the accountant why they think an EPP is more suitable for you than a PPP.    It is possible that the accountant is decades out of date.   The vast majority of accountants do not hold any permissions to discuss pensions and those that used to lost them in 1995.   Pensions have gone through many changes since then (in particular 2006)

I have an existing SIPP, so is there any benefit in setting up an "executive" scheme instead of having the company pay directly into my SIPP?

In the vast majority of scenarios, a shareholding director would use an individual pension plan with employer contributions.  In a small number of cases, they may use alternatives.

FireFury

dunstonh said:

You will need to ask the accountant why they think an EPP is more suitable for you than a PPP.    It is possible that the accountant is decades out of date.   The vast majority of accountants do not hold any permissions to discuss pensions and those that used to lost them in 1995.   Pensions have gone through many changes since then (in particular 2006)

The accountant indeed says he can't discuss pensions, which is why he told me to talk to a pension advisor. Unfortunately, the pension advisor's advice is absolutely clear as mud - he has basically done exactly what every article I've read on the web has done and explained that paying into an EPP avoids corporation tax without addressing the fact that (as far as I understand) so does paying into any other pension pot!

I'd love to find an article that actually explains the differences between an EPP and a PPP - so far everything I've found on the web is basically sales bumpf that lists the benefits of an EPP without addressing the fact that the same benefits also seem to apply to a PPP.

I have an existing SIPP, so is there any benefit in setting up an "executive" scheme instead of having the company pay directly into my SIPP?

In the vast majority of scenarios, a shareholding director would use an individual pension plan with employer contributions.  In a small number of cases, they may use alternatives.

Thank you, that seems to answer my question that there is essentially no reason to set up an EPP instead of just having my employer pay directly into my existing SIPP.

p00hsticks

I had an EPP a while back when I had my own company.
It's been a while ago now so my memory may be faulty, and I've since retired and  transferred to another scheme, but  I seem to recall that one of the features was that the scheme could, if desired, loan money to the company ?

FireFury

p00hsticks said:

I had an EPP a while back when I had my own company.
It's been a while ago now so my memory may be faulty, and I've since retired and  transferred to another scheme, but  I seem to recall that one of the features was that the scheme could, if desired, loan money to the company ?

That presumably risks you losing your pension if the company goes tango-uniform though, so although my company is in good shape I would be pretty hesitant to do that.

dunstonh

The accountant indeed says he can't discuss pensions, which is why he told me to talk to a pension advisor. Unfortunately, the pension advisor's advice is absolutely clear as mud - he has basically done exactly what every article I've read on the web has done and explained that paying into an EPP avoids corporation tax without addressing the fact that (as far as I understand) so does paying into any other pension pot!

There is no role called pension adviser.   It would either be an FA or an IFA.
FAs are restricted and most won't have an EPP to offer.  So, knowledge on EPPs may be limited.
IFAs are whole of market and can arrange them.
However, neither is going to give you quick advice over the phone.  They have to be vague and generic as advice has to be documented and based on your needs.     You are getting what you are paying for effectively.

xylophone

If you decide that you need advice, you could try

https://adviserbook.co.uk/

Tick "confirmed independent" and other requirements when the menu comes up.

Marcon

p00hsticks said:

I had an EPP a while back when I had my own company.
It's been a while ago now so my memory may be faulty, and I've since retired and  transferred to another scheme, but  I seem to recall that one of the features was that the scheme could, if desired, loan money to the company ?

Your memory serves you well!

OP - for a good explanation, see https://www.financialadvice.net/executive_pension_plans_epp/zone/647 (and then keep your life simple and have company contributions paid to your SIPP).

p00hsticks

FireFury said:

p00hsticks said:

I had an EPP a while back when I had my own company.
It's been a while ago now so my memory may be faulty, and I've since retired and  transferred to another scheme, but  I seem to recall that one of the features was that the scheme could, if desired, loan money to the company ?

That presumably risks you losing your pension if the company goes tango-uniform though, so although my company is in good shape I would be pretty hesitant to do that.

I suspect that's true - I can't remember the details and it's not a facility I ever made use of.
I can imagine that a potential plus side would be if your company only had £x to spare one year but urgently needed to spend that on (say) new equipment, with an EPP you could put the £x into the pension and then loan it straight back to the company,  to be paid back into the pension at a later date ?.