Executive Pensions

1. Examine the Options

1.1 If your business operates an approved company pension scheme, you can take advantage of high tax relief levels on contributions.

• You can now contribute up to 100 per cent of your gross earnings to pension schemes, up to an annual limit (the 'annual allowance') of £235,000 (in 2008/09).
• If you want to make a high level of contributions, it may make sense to put the money with three or four providers, rather than putting the whole lot into one pot.
• Your own company scheme (if any) may place a limit on the size of contributions
• Company pension schemes must be open to all eligible employees on equal terms. But you can tailor the scheme to provide different levels of benefit for different categories of employee.

1.2 Approved alternatives to making provision through the company pension scheme also qualify for high levels of tax relief.

• You could set up (or join) an executive pension plan (EPP) (see 4.1).
• You could set up (or join) a small self-administered pension scheme (SSAS). This is only possible for limited companies and where the scheme will have fewer than 12 members (see 4.2).
• You could invest in a personal pension plan, a stakeholder pension, (see 4.3) or a self-invested pension plan (SIPP) (see 4.4). Personal and stakeholder pensions and SIPPs will be 'money purchase' schemes.