Small Business Pensions

Hi,

I'm a director of a Limited Company employing just myself and my wife. We currently draw a modest salary from the business via PAYE and plan to take periodic dividends over the course of the year.

At the moment we have no active pensions in place and I am considering starting a Stakeholder pension for both myself and my wife. My questions are:

2) Is it best for me to pay most of the contributions as the employer and a smaller amount from my salary as an employee or the other way around?

All thoughts much appreciated.

Jonny

wrote

Dividends are not salary!

But stakeholder contributions need not come from salary.

"Ronald Raygun" wrote

True - I was merely pointing out that "salary" can never "include dividends".

In your case I would opt for a personal pension as they are more established and you would be adding your funds to a bigger 'pot'.

Normal pension rules then apply. ie. look ahead to what you want to earn when you are drawing from it and work out how much you need to invest from there.

But IIRC there are restrictions on owning a stakeholder if one is a controlling director.

Unfortunately, can't find anything that details this.

tim

What you are probably thinking about is the 'concurrency' rules. Normally, anybody in an occupational scheme and who earns less than £30,000 can also pay £3,600 into a stakeholder each year. However, Controlling Directors are barred from doing this - presumably because they are more able to 'manipulate' their earnings.

However, if there is no occupational scheme in place, then they are free to contribute to a Stakeholder / Personal Pension, either £3,600 or more if their SALARY can support higher contributions.

Are you sure that this is better than:

a) taking out the money in dividends and investing however he chooses without restriction?

b) leaving the profits in the business and building up the assets for when retirement comes?

snipped-for-privacy@please.invalid (AnthonyL) wrote

A present-day PP *is* a "stakeholder" pension

A very good question :)

Personally (I live mostly off divis) I run a DIY investment portfolio which I plan to run down during retirement, as well as making the maximum permitted (minimal salary basis) contribution of £2808/year into a SIPP

Building up the balance sheet is risky because it's an open invitation to get sued by anybody who wants to have a go.