Pension Planning - Pension Choices for Company Owners

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Company Owners

If you run your own business, you could use personal pension plans, or stakeholder schemes, to build up your retirement income. But if your business is set up as a company, you could instead set up your own occupational pension scheme.

There are two broad types of occupational scheme that are particularly suited to your situation. These are:

• executive pension plans and
• small self-administered schemes.

The tax rules and advantages associated are complex, and there are variants available that exploit the rules of both types of scheme, therefore it is wise to get advice from a pensions consultant, your accountant or an IFA experienced in this area.

Beware that the Inland Revenue takes a close interest in how these schemes are used and has severe penalties if the rules are breached.

Executive pension plans

These are offered by insurance companies and are aimed at directors of companies, both small and large. Although each plan is tailored to a particular individual, these are employers' pension schemes rather than personal plans. This means that there is no limit on the amount your company can contribute to the plan on your behalf, subject to the pension and other benefits not breaching the Inland Revenue limits and provided certain rules about funding are complied with. This gives you the scope to build up a much larger pension than you could via a personal pension plan, where the level of contributions is strictly limited.

Small self-administered schemes

Rather than being run by an insurance company, a small self-administered scheme is in the hands of trustees appointed by your company. `Small' means covering fewer than 12 members. The trustees control how the pension fund is invested and, subject to certain restrictions part of the fund can be invested in your company's shares or property. This means that the pension fund can provide a source of finance for your business; however, any loans from the fund to the business must be at a commercial rate of interest.