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Thomas is 53-years-old. He is the owner and sole shareholder of a Private Limited Company in the property sector. Having concentrated most of his energy into growing the business, he would now like to build up his pension fund. Thomas has a personal pension plan and has made a number of small contributions in recent years.
Client aims and objectives
- Put as much into his pension as is possible. Thomas is aware that there is £40,000 annual limit on contributions.
- Achieve tax efficiency.
- Retire between the ages of 60 and 65.
- Invest in pension funds with a pre-determined risk level.
- Use allowances and ‘carry forward’. Although Thomas has been contributing to a personal pension for the last four years, he did not pay-in the maximum allowed. Therefore, he should maximise this year’s annual allowance by making up the difference to £40,000, and then use the ‘carry forward’ option on the previous three years to do the same.
- Business expense. Given that Thomas is the majority shareholder of a Private Limited Company, the above can be funded as an Employer’s Contribution. Therefore, Thomas should deduct this money as an expense when it comes to paying his Corporation Tax.
- Contribution calculation. Thomas receives his remunerations as a combination of salary and dividend. We would work with his accountant to calculate and recommend that a total contribution of £145,000 could be made to a pension fund. This would fall within the ‘Wholly and Exclusively’ rules.
- Risk profiling. So that Thomas is in charge of the level of risk in his pension fund, we would suggest a managed portfolio that could be risk-profiled to an agreed level.
Thomas would be delighted that such a high injection of funding into his personal pension plan would be possible, and that savings on Corporation Tax would be made. Working with him, we can create a 10-year funding timeline to plot a course to the retirement he desired.