Executive Pension Plan

Director / Executive Pension Plan (EPP)

Executive Pension Plans are tax-efficient savings plans set up by the company in which the contributions build up in a tax exempt fund, and are used at retirement to provide tax free cash and pension.

They are normally established by company directors for their own benefit, but they then frequently include other valued employees, though only the favoured can expect to be given the levels of investment that these schemes offer.

Effectively, they are money purchase occupational pension schemes, and so since A-Day, they operate for the most part like any other scheme.

They allow payments from an employer to be paid into a pension fund which is set up under trust, with the trustees responsible for the day-to-day administration, such as ensuring contributions are paid regularly and benefits are paid out promptly.

For the individual, there is flexibility of retirement, allowing the person to retire early and hand over to others (although early retirement can only be taken after the age of 55), or to work well past the company’s normal retirement date.

From an employer’s perspective, an EPP can form the core of a benefits package to attract, motivate and reward key executives, plus the financial benefits of contributions being allowable as a business expense and able to be set against taxable profits. Furthermore, there is no NIC liability and so extra pension contributions into an EPP can be made instead of salary increases.

EXECUTIVE PENSION PLANS ARE REGULATED BY THE PENSIONS REGULATOR

A PENSION IS A LONG TERM INVESTMENT, THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.