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Paying directors - salary above the Secondary threshhold - Is there any advantage as far as state pension is concerned?

For 2011/12 a salary of £589 to the director/shareholder would attract no National Insurance at all. But entitlement to the Statement pension is still secured because it is above the LEL. 

Is there any disadvantage, as far as the State pension is concerned in the company not paying the Employers NI?

Also is there an advantage with regards to the state pension in paying a salary above the Primary threshhold?

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By geoffmw
18th Apr 2011 11:26

It depends on

whether the rules change as envisaged by the present government.

Under the existing system there is a distinct advantage in building up second state pension entitlement and definitely as regards potential statutory maternity pay in appropriate circumstances.

When it becomes compulsory for every employer to have an employers pension scheme this will also be an advantage because dividends will not count towards retirement income.

The motto is constant review.

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18th Apr 2011 16:38

At present

no advantage unless salary is increased to above a threshold of somewehere around £12,000 (not sure exactly) - the reason being that earnings between the LEL and this threshold are treated as if they are at this level for the purposes of the state second pension.

Don't forget that there may be other credits for NI - eg for full-time carers or for over 60's.

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By geoffmw
18th Apr 2011 17:12

agreed

which was why I specified that the circumstances can vary and need to be taken into account.

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