A pension is still a terrific tax-efficient option for small business owners who want to save for retirement, extract profit from their business and benefit from tax relief.
But a series of rule changes since 2006 and misleading media headlines have mischaracterised pensions as mediocre.
Read on for several reasons why pensions are still ‘worth it’ and why you should move fast to maximise their potential.
Relevant pension types for business owners are personal pensions, self-invested personal pensions (SIPP) or small self-administered schemes (SSAS).
The same tax-efficient components apply to each, but in simple terms:
These favourable factors make paying into a pension seem like a no-brainer — but the direction of regulatory changes mean delaying is detrimental:
Apart from their primary function of making retirement much more comfortable, pensions are still ususally the best way to extract profits from your business.
But with conditions becoming less favourable over the years, our best advice for SME owners is to strike now, while there’s still a clear advantage.
Another reason to act now is that an unnamed senior government source recently told the Mail on Sunday that the Chancellor Phillip Hammond is also eyeing the £38 billion paid out every year in the form of pension tax relief as ‘one of the last remaining pots of gold we can raid’.
Sun Tzu said ‘opportunities multiply as they are seized’ — when it comes to pensions, we concur.
To discuss bespoke financial solutions for you and your business, contact our team today.