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Background

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.

Our solutions

  1. 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.
  2. 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.
  3. 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.
  4. 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.

The outcome

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.