Pensions Pensions Pensions

[Fred Bloggs]

Your company can put it's entire turnover into your SIPP if it chooses to. In the next financial year my Ltd Co will be putting ~50% of its turnover into my SIPP.

[lje]

Ok guys let me get this clear.

If I pay myself say 12K a year I was under the impression that my company can't pay more than 12K into my SIPP. However from what I read here the company can pay more than my salary into the SIPP, right ? Also does dividend payments have any impact other than taking my into a higher rate band?

Thanks

Steve

You are limited to £12k personal contribution but there is no limit to your company's contribution. Dividend payments have no affect whatsoever.

[Ninja1980]

I'm in the 6th week of being a limited company contractor, so far so good . I'm starting to think about what to do about pensions. The two options I've thought of: 1) open a SIPP and make direct contributions from my company every month or so 2) keep all my cash in the company and invest it in the company name.

I'm finding it really hard to see what the advantages are by opening a SIPP??? Can anyone give me any advice???

Thanks

[moorfield]

The two options I've thought of: 1) open a SIPP and make direct contributions from my company every month or so 2) keep all my cash in the company and invest it in the company name.

I'm finding it really hard to see what the advantages are by opening a SIPP??? Can anyone give me any advice???

Many discussions on here about this if you search ....

In short.

SIPPs are very tax efficient, Ltd Co investments are not.

[Ninja1980]

Sorry, I should have explained myself a little better. Before I started looking into SIPPSs, this was my plan on running the company:

1) My total wage plus dividends is low enough to avoid 40% personal tax,
2) All other funds will be invested in the company to be taken out at a more tax efficient time (e.g retirement/between contracts) and reinvesting in ISA's (to the limit) or shares. Therefore, I plan to never to pay 40% tax.

As the saving in corporation tax will be roughly offset by future tax paid when I draw the pension (correct me if I'm wrong), what is the benefit of using a SIPP (or other pension)??

Also, I have spent the last two hours researching this subject but am still in two minds on the best thing to do???

[Fred Bloggs]

One advantage of a SIPP is that at age 55 you can pull 25% of the cash out of your SIPP entirely free of tax, either corporate or personal, and then put that cash into ISA's to get a tax free income stream.

[vince_labcoat]

You are limited to £12k personal contribution but there is no limit to your company's contribution. Dividend payments have no affect whatsoever.

There are several posts here that state that company contributions can exceed the salary drawn, but I have had advice both from my accountant and from threads on this board that says this is not allowed. If your Ltd Company pays you 12k per year then the maximum pension contribution is also 12k. There is a maximum annual contribution of £245k (or thereabouts), but then I assume that this would only be allowed if a salary of that much was drawn.

Please correct me if I am wrong as if I could still only draw my 6k salary, but contribute £20k to my SIPP, then I would.

As for my savings plan:

Max out ISA's for me and Mrs Labcoat first (main retirement income)
Pension (currently 6k per year)
Warchest

I choose pension over warchest as there is no compound interest growth potential in warchest. Warchest on Ltd company closure with relief will be to pay off any last remains of mortgage, and ensure continued ISA contri's.

Pension 25% tax free is for a little project abroad somewhere, and annuity/income drawdown is pocket money...

I also had thoughts of every 4 years or so, have a pay structure, where say £100k turnover for ease, have a salary of £50k and pension of £50k to give it a few boosts over the next 20 years or so..... Anyone else do this ??

[Hiram King Of Tyre]

Another SIPP advantage is that it's willable and not subject to IHT as far as I know

[lje]

There are several posts here that state that company contributions can exceed the salary drawn, but I have had advice both from my accountant and from threads on this board that says this is not allowed. If your Ltd Company pays you 12k per year then the maximum pension contribution is also 12k. There is a maximum annual contribution of £245k (or thereabouts), but then I assume that this would only be allowed if a salary of that much was drawn.

There are some different interpretations of the rules. However, if you read the details it is clear (to me at least!) that the limit is on personal contributions and not on company contributions.

[Ninja1980]

Another question. Does anyone know if its possible into pay into two pensions at once. E.g. a Hargreaves Lansdown Vantage for funds and Sippdeal for shares????