Our client had decided it was time for him to invest in a formal pension on a regular monthly basis. We are not regulated to provide pension advice and will refer client to Independent Financial Advisors with specialist experience of working with contractor. However we are always willing to help our client understand how pensions work in their particular circumstances.
He wanted to put a regular premium of about £20,000 into a pension. As a director of his company he had a salary of £12,000. We advised that the maximum allowable pension contributions would therefore be £12,000 which was 100% of his salaried income as dividends are not accepted for qualifying pension contributions. We advised that he could top this up to the required £20,000 by the company making an Employers Contribution into his personal pension. This is better than setting up a company scheme as the company may not be trading when he retires and this would be a simpler route.
We also advised how the company could manage its cash-flows by retaining some profits in the company to cover the monthly direct debit to the pension provider, to ensure the company bank account did not go into overdraft each month.
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