Executive (Via Limited company) Pension Options

Rapier503

Hi,
I have a limited company that I would like to fund a Pension from (Rather than taking the money out of the company and paying tax I want to put it straight into a pension).

Could I do the above with a SIPP if so is that the best option?
If not what are my other options (best option and/or cheap fees)?

Please provide links to and good companies or useful information.

Thanks in advance

dunstonh

Could I do the above with a SIPP

Yes.

if so is that the best option?

Possibly. Possibly not.

If not what are my other options (best option and/or cheap fees)?

You need to make your mind up what you want. Best or cheap. The two do not go hand in hand with each other.

When investing for retirement, the priority is the investments. The type of pension, provider and charges come secondary. For example, if you want a portfolio that includes the BRIC countries, emerging markets, specialist areas like Nat Resources, Fin options etc then you can rule out the cheap option of the stakeholder pension. That will leave you with a personal pension, fund supermarket pension or a SIPP.

If you are an inexperienced investor who doenst care about investment returns and is going DIY then using a SIPP or fund supermarket pension and to some degree a personal pension would be a waste of money.

So, what do you want from your investing?

meester

SIPP:
www.h-l.co.uk

Your company (as your employer I assume) can make contributions up to about £263k (?) /year. Only catch is payments must be commercially correct, i.e. that your salary including pension must not be above a commercial rate for the same job in private sector. You can also fund pension deficits. basically there is no problem making large pension payments for working directors, but there might be for spouses who do not substantially contribute to the business

Payments are made from company funds and are not taxable.

You can also make PERSONAL payments from your OWN income up to 100% of salary, or £3,800 if that is greater than your salary after deducting 20% for tax.

robp

I was 'sold' an EPP when I had my first company, with Lincoln. This seemed like a good idea at the time, but it isn't performing well and has a very bad transfer value. Avoid at all costs!

This time I've set up a SIPP and pay an amount in each month from the company account. This gives much more flexibility for my circumstances.

I use HL.

dunstonh

I was 'sold' an EPP when I had my first company, with Lincoln. This seemed like a good idea at the time, but it isn't performing well and has a very bad transfer value. Avoid at all costs!

Lincoln have a relatively decent fund range nowadays. Their internal fund range isnt great but they do use external funds as well which may be available on your contract. Returns are based on where you invest. Not what pension provider you use. Check to see what alternative fund options you have.

Rapier503

Thanks for all the replies so far all are very useful

Dunstonh:-

The problem is I don’t know what I want form my investing only like everyone else enough for a comfortable retirement (Then we have the question, How much do you need for your retirement – How much should I be aiming for?).

I know nothing about pensions (options etc) and nothing about investments.

What I don’t like about pensions (Probably like everyone else) are high fees, the transfer value from a pension not being great, and the fact if you die 5 years the pension company keeps your money. Please comment.

I have heard that only 1/3 of fund managers beat an FT100 tracker (Is this true) so it puts me off pensions where fund managers are involved as this will incur higher fees.

I am 40 and have a small amount of pension in various companies (Is it work transferring?).

So what I was thinking is that I would want a pension with mostly security (Cash? Or what?) but with some limited risk (FTE100 tracker?) and some high risk (What?). What percentages do I put into each?

So from the above what do you recommend and why?

Thanks again in advance

dunstonh

The problem is I don’t know what I want form my investing only like everyone else enough for a comfortable retirement (Then we have the question, How much do you need for your retirement – How much should I be aiming for?).

I know nothing about pensions (options etc) and nothing about investments.

That suggests you shouldnt use a SIPP. SIPPs are the most expensive option (assuming you would be using it to purchase funds). The extra cost is worthwhile if you utilise the features but not if you dont.

What I don’t like about pensions (Probably like everyone else) are high fees, the transfer value from a pension not being great, and the fact if you die 5 years the pension company keeps your money. Please comment.

Thats all myth or out of date. Pensions have the lowest charges generally than any other investment wrapper. Modern pension transfer values equal the real value and if you die before retirment your whole fund value is paid out (outside of the estate as well). Its only post retirement that death benefits can be lower but that would depend on what options you choose at retirement. Capital buy back, income drawdown, extended guarantee period, spouse included etc can be used.

I have heard that only 1/3 of fund managers beat an FT100 tracker (Is this true) so it puts me off pensions where fund managers are involved as this will incur higher fees.

Myth. The FTSE100 trackers have spent the last 14 years in the bottom half and bottom quartile even of the UK all companies sector. It hasnt been the place to be, although the last 3 months have seen an improvement.

I am 40 and have a small amount of pension in various companies (Is it work transferring?).

No-one can say without knowing the details.

So what I was thinking is that I would want a pension with mostly security (Cash? Or what?)

You are going to be invested for around 25 years. Cash is not a viable long term investment. It barely keeps up with inflation.

but with some limited risk (FTE100 tracker?)

A FTSE100 tracker is medium/high risk. Plus you would only be investing in one area and the UK isnt really looking like its going to have a good few years ahead.

What percentages do I put into each?

Depends on your risk profile and how you want to invest.

So from the above what do you recommend and why?

I cannot recommend anything as that would breach board rules and also FSA rules. Anything posted is purely for discussion purposes.

However, I would consider a SIPP as being unsuitable for you. The same for fund supermarket pensions and probably personal pensions. A stakeholder pension is what you should be looking at as its the cheapest option (a few personal pensions would could in cheaper but you would need an IFA to utilise those options). Most stakeholders have cash and fixed interest funds and a FTSE all share tracker if that is really what you want.

Rapier503

Thanks for that

The other thing is I planning to put large sums into a pension (if I can - what is the limit) (£20K this year, £30K next year) and hopefully continuing (but I may be out of work and not be able to do it the odd year). Does that affect which pension I should invest in?

Regards