Getting the most out of a workplace pension

New workplace pension, how do payments to it affect personal allowance? What's the right contibution

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Hi,

My company (that I own and run) will now be giving me a pension, due to auto enrolment and me deciding not to opt out. For this I've transferred an existing company pension I had (standard life) from a previous employment.

Not having made any pension contributions through my company before, I've been trying to read up on how best to structure the payments. Unfortunately as will all things tax related, it quickly becomes confusing.

I currently pay myself £11.5k through PAYE, so that I'm making NI contributions, etc., the rest I take as a dividend. Barring the one time I was employed elsewhere, to date all my pension contributions have been personal to a virgin stakeholder pension. I've never made contributions through my company.

I've read that contributes made through my company will be classed as an expense, and so not incur the 20% corporation tax. Which sounds appealing. However, I know that personal contributions also come up on my self assessment. I'm really not sure what split between employer and employee contributions would work out to be the most tax effective.

I'm also not sure whether employer pension contributions count toward my personal tax allowance, and so I'd need to pay myself less than £11.5k, of course I want to make sure I'm contributing enough to NI.

Say I want to pay £100/month into my QWPS plan, what's the best split between employer and employee? And how does that affect my £11.5k salary and NI contributions?

Sorry if any of that isn't clear, I'm certainly no expert. Let me know if anything needs clarification.

Replies (2)

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RLI
By lionofludesch
22nd Jul 2017 18:21

As an owner manager, you may find it worthwhile visiting a specialist financial adviser. Auto Enrolment isn't really aimed at you. It's aimed more at reluctant employer contributors. You, on the other hand, are an enthusiast. You may find that there are better options for you.

Sure - your company can get Corporation Tax relief at between 19% and 20%, depending on your year end, on contributions it makes on your behalf.

Your personal allowance isn't affected at all. However, if you're the only employee, a salary of £11500 might not be the best option and you'd benefit from some advice from a local accountant.

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By zebaa
23rd Jul 2017 10:13

You decide on the pension contribution, but see TPR web site for the minimum. The thing to note is not all AE pension providers are the same. Some charge higher on-going fees than others which is very important when you look at an investment which may last 20, 30 or 40 years.

If you want the best outcome you have to put some effort into this and do some research. Any short cut will cost you somewhere along the line. Start off with TPR web site & go from there.

Edit: TPR = the pension regulator

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