Executive Pension Plans (EPPs) are company pension schemes designed for one or a small number of directors and senior employees of Director/Shareholder run private companies. They 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.

EPPs are about control.  The member controls the retirement date, the contribution levels and investment choice therefore providing confidentiality for company directors as it enables them to keep their pension arrangements separate from the main company pension scheme.

Executive Pension Plans are tailored to the individual. The employer must make contributions, and the employee can too. Rules on tax relief, contribution limits and tax-free lump sums are the same as for other registered pension schemes.

EPPs are 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.

Advantages of an EPP are:

• Contributions don’t attract National Insurance and do not create a benefit in kind for the employee i.e. there is no income tax paid on contributions
• Flexibility of contributions – in profitable years, employers and employees can contribute substantial sums, and can reduce these in leaner years
• Contributions by the business are tax deductible as a business expense and therefore don’t attract Corporation Tax

The government requires trustees of EPPs to fill in forms every year with details about the scheme and its benefits. Experienced advice from an independent financial adviser is essential. EPPs can be extremely complex and they require ongoing monitoring and review.

Any questions on Executive Pension Plans (EPPs)?

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