If you run your own business as a limited company director, then you most likely won’t have an employer setting up a workplace pension for you – instead, you’re in charge! Instead, you can set up a personal or private pension to save for retirement. This could be a Self-Invested Personal Pension (SIPP), stakeholder or other personal pension product.
When you set up a director pension, you can choose whether to make personal contributions or business contributions into your pension, or both! Contributing through your business has big tax benefits. Pension contributions can be treated as an allowable business expense and so you could offset the contributions against your corporation tax bill. You may want to be able to move flexibly between the two different payment methods.
Any personal contributions you make will receive a 25% tax relief boost from the government. So for every £100 you save, they will add £25. There are limits and allowances you need to keep in mind.
Your pension savings are usually invested in pension funds, which have the opportunity to grow throughout your lifetime. You can generally choose where you want to invest and change your investment mix as and when you like.
One of the best ways to make your pension grow is through investing it in the stock market. Pensions are a very, very long-term savings method for most people. This makes them designed perfectly for investing, because there is ample time for any short-term losses to recover and even uplift after uncertainty. Please bare in mind that market fluctuation is a normal and inevitable characteristic of the stock market, and that past performance is not an indicator of future performance.
Want to learn more about pensions & tax tips for directors? We’ve created a no-jargon, 101 guide on everything related to pensions and tax for company directors. It will outline how a private pension works, explain the very generous tax breaks from the government and ultimately help you as a company owner save for your retirement and achieve financial freedom!
To download this free guide, email our team here who can share the guide with you.