Employer pension contributions
What is an employer pension contribution?
It's a payment made by an employer into an employee's pension. The employer could save up to 32.8% in tax and National Insurance and the employee could benefit from greater tax savings by having this contribution paid directly to their pension.
Who benefits from an employer contribution?
Tax is a complex subject so if you're at all unsure you should seek professional advice. Tax benefits depend on individual circumstances and tax rules can change.
How much can my employer contribute?
Unlike personal contributions, employer contributions aren't limited to what the employee earns. A company could contribute more than the employee's earnings - up to the current annual allowance of £40,000, or up to £160,000 in some circumstances if using carry forward. If the employee has 'adjusted income' over £150,000, contributions might be limited to £10,000 - see our factsheet. If the employee has already accessed a pension, different rules can apply.
This is particularly beneficial for controlling directors who often take a small salary and large dividends to benefit from the tax advantages. As dividends don't count as 'relevant UK earnings', this would normally mean a director could only contribute up to the amount of their salary. However, with an employer contribution, directors can receive contributions greater than their salary, giving them more money in retirement.
NOTE: HM Revenue & Customs (HMRC) could question the contribution if the total salary and benefit package is excessive for the work undertaken. Contact your accountant if in doubt.
How can I make an employer contribution?
You can make an employer contribution to the Vantage SIPP by cheque, bank transfer and/or Direct Debit. Before applying please ensure you have read and understood the:
Vantage SIPP Key Features (including the Contribution Checklist)