Personal pension paid by company

Personal pension paid by company

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A company can pay a personal pension contribution for an employee.

If so, is the company bound by the same limits as an individual? £3,600 or earnings and an upper limit of £215K

A client of mine has been informed by a pension advisor that a company is not subject to these limits. This is not my understanding but I am searching for a conclusive text on this.

Also if the client wants to put more than £3,600 in ( probably no pensionable earnings this year) should he set up a company stakeholder scheme.?
Justpracticing

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By MBK
12th Jun 2007 13:03

It is possible....
for a company to make greater payments then the £215k limit, and it doesn't have to be related to earnings.

If you send your e-mail address to [email protected] I'll forward a couple of very useful briefings on the subject produced by Standard Life

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By NeilW
12th Jun 2007 14:00

Limits
Firstly nobody is constrained by any limits. You can put what you like into a pension scheme. What is constrained is the tax relief available.

For a personal pension/stakeholder there are two types of payment - an individual payment and an employer's payment.

Where an individual (self-employed or employee) makes a payment into a scheme, tax relief is limited to the higher of £3600 or the relevant earnings. The payment is made net of tax and the pension provider has to have proof of earnings/profits.

Where an employer makes a payment into a pension scheme (of any type, set up by anybody), tax relief for the employer is limited to the annual allowance (£225K for 2008) as long as the payment passes the 'wholly and exclusively for the purposes of the trade' test. The payment is made gross.

All pensions are subject to these rules regardless of what type they are (although with a genuine occupational scheme, as opposed to a stakeholder/personal pension, there is no such thing as an individual contribution).

There is no need for another scheme. An employer can pay quite legitimately into one owned and setup by an employee and still get full tax relief.

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By tonmoykumar
13th Jun 2007 16:53

What if the individual's contribution exceeds the £225000 limit?
Isn't there a higher rate tax charge on an individual's contributions above the annual allowance of £225,000?

Also I believe Employer's contribution is deductible in full, except anything above £500,000.00 which then needs to be spread.

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