Stakeholder pension contributions

[Mailman]

However, if your pension pot exceeds £1.4m (rising to £1.5m in 10 or so years time), it will attract a punitive tax of 70% (presumably in the interests of fairness).

You see, this is the thing that gets me about this country and its government.

They are forever going on about how poms are about as crap as saving as they are crap at playing Rugby BUT then they go tax the hell out of your pension savings???

Wouldnt it make more sense to make pension payments tax free AND also take no tax out when you retire and money is drawn down from your pension plan? If the Government was enlightened enough to do this PERHAPS then there would be REAL incentives to start saving for your retirement?

Mailman

[malandri]

Still no answer

Dear all,

Thank you for the input so far, which is useful but it doesn't answer my question. My question was how can i calculate my deemed salary's 17.5% The deemed salary depends on the pension contributions (as they qualify as expenses) and the maximum pension contributions depend on the deemed salary.

I came up with an equation to solve this but i would imagine that there must be a definition that i am missing that makes things simple(r).

(Revenue -5% x Revenue -qualifying expenses - pension )/1.128 is the deemed salary


17.5% of the above is the maximum pension contribution, ie

17.5%x((Revenue -5% x Revenue -qualifying expenses - pension )/1.128 ) = pension

If i know my revenue and expenses, I can solve this and get the value i am looking for. Looks to me though quite complex, i wonder if there is a simpler rule in place, this is why i asked you

[IR35 Avoider]

I feel moved to do some high school maths...

R = revenues (company's fee income)
E = schedule E expenses
p = pension contribution
n = employer's NI
s = salary

p = 17.5%*s
n = (s-52*94)*12.8%
95%*R = s+n+E+p

=> s+n+p = 95%*R-E /* get all the constants on one side */
=> s+(s-52*94)*12.8%+17.5%*s = 95%*R-E
=> s+12.8%*s-(52*94*12.8%)+17.5%*s = 95%*R-E
=> s (1+12.8%+17.5%) = 95%*R-E+(52*94*12.8%)
=> s = (95%*R-E+52*94*12.8%)/(1+12.8%+17.5%)
=> s = (95%*R-E+626)/1.303

Let's try this for R = 100K, E=0.
s = £73,389
n = £8,768
p = £12,843

s+n+E+p= £95,000

[ASB]

I feel moved to do some high school maths...

R = revenues (company's fee income)
E = schedule E expenses
p = pension contribution
n = employer's NI
s = salary

p = 17.5%*s
n = (s-52*94)*12.8%
95%*R = s+n+E+p

=> s+n+p = 95%*R-E /* get all the constants on one side */
=> s+(s-52*94)*12.8%+17.5%*s = 95%*R-E
=> s+12.8%*s-(52*94*12.8%)+17.5%*s = 95%*R-E
=> s (1+12.8%+17.5%) = 95%*R-E+(52*94*12.8%)
=> s = (95%*R-E+52*94*12.8%)/(1+12.8%+17.5%)
=> s = (95%*R-E+626)/1.303

Let's try this for R = 100K, E=0.
s = £73,389
n = £8,768
p = £12,843

s+n+E+p= £95,000

Now you've hurt your head doing that it's a shame. It's all irrelevant from April when the entire regime changes.

Basically the company can contribute upto 215k PA.

From a POV of efficiency company payments win over personal ones every time. They will reduce the deemed salay by the amount of the contribution.

eidt: of course it not toally irrelevant, since it the same basic sum.

[Mordac]

>This doesn't mean you lose anything, it means you will have more savings at a later age.

If you live that long...

[DimPrawn]

Just wait another month and you can put in up to £215K pa in regardless of salary.

What's so hard about that?

[Hex]

There's been some discussion about putting in large employer's contributions on Shout99.

Here is a quote:

"Whilst employees can certainly make a personal contribution of up to 100% of salary, we are facing a situation where 'substantial' employer contributions will need the authorisation of the local inspector of taxes before they will be allowable."

Full article here: http://www.shout99.com/contractors/s...ode_local=Flat

and a follow on here:http://www.shout99.com/contractors/s...ode_local=Flat

You may need to register to read them.

The upshot seems to be that 'substantial' employer contributions need authorisation as outlined above. But what they mean by 'substantial' has not yet been properly defined so it's all a bit fuzzy. Just what we needed - another fuzzy regulation.

[eternalnomad]

maybe we could all make "disguised payments" to go nicely with our "disguised employee" status.

Dont trust these feckers i.e. the scumverment with a penny of your cash - get some proper advice (you WILL need to pay for proper advise).

Gaydon has raided pensions once already,there is nothing to stop him doing it all again to give "hard working(retired) families" a pension they are entitled to but could never afford.

Simple solution is Gaydons mind would be to raid cash that you will have built up for your pension - after all (a) you have a decent pension pot so you must have stolen it and (b) you are unlikely to vote for him and his shower anyway

Its all about fairness

[malandri]

Thanks

Thanks IR35 avoider for the nice calculation. It is more precise than mine as it takes into account that employer NI is not paid on the first 4800 something of the deemed salary

Hadn't realised that i can contribute as much as i want as of April... An IFA told me so a few hours ago as well. Sorry!

ASB, why cy contributions are better than personal ones? I was planning to have a stakeholder pension funded by myself and expense it every month to the company

[tim123]

3. But point 2 is irrelevant, as it should be the company that makes the contribution so that you can avoid employers NI as well, and there is no limit on what the company can contribute.

You are not keeping up. An employer contribution requires authorisation from the IR. The IR have recently stated that where a contribution is disproportionate to the value of the employee to the company, they will disallow the contribution. (Obviously group schemes contributing 6% or so will be automatically authorised.)

What is disproportionate to the employee's value is currently unclear (as the IR are still making up the rules on the back of the office communal envelope), but the starting point would appear to be the salary paid. Any employer contributions to a company pension at 100% or more of the actual salary paid in that year are likely to be disallowed.

tim

edit:

Oops, just got to the post where someone has said something similar. Oh well