Choose the right pension scheme

Registered pension schemes for directors and owners


There are a variety of pension schemes that can be registered with HM Revenue & Customs (HMRC) designed specifically for directors and owners, although they can also be set up for the benefit of other employees.

The changes in the tax rules for pension schemes have given employers and pension providers greater flexibility in the design for pension schemes. Here are some examples of registered pension schemes that may be available for directors and owners, although some can also be set up for the benefit of other employees.

Executive pension plans (EPPs)

Insurance companies tailor these defined contribution occupational schemes 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.

Following the simplification of the tax regime the relative advantage of EPPs - that they allowed a fast build-up of entitlement over 20 years rather than 40 - has to some extent been undermined.

For information on different types of occupational pensions, see how to know your legal obligations on pensions.

Self-administered schemes (SASs) (also known as Investment Regulated Schemes or occupational pension schemes)

These are registered pension schemes and are generally set up for directors/owners of companies. They allow a small group of trustees appointed by your company to choose how to invest the funds. The scheme administrator, together with the trustees, is responsible for ensuring that the scheme remains within HMRC rules.

The main advantage is that a SAS can be very flexible in terms of the investment choice as it isn't limited to stocks and shares or insurance funds. Its investments include commercial buildings (for example, the building used by the employer), loans to the employer and the purchase of unquoted company shares.

Self-invested personal pension plans (SIPPs) (also known as Investment Regulated Schemes)

These allow you to select your own pension fund investments. They operate on a similar basis to insured personal pensions with access to collective funds, except that HMRC also allows direct investment in UK and overseas quoted securities as well as commercial property.

Tax rules governing all these pension plans have been simplified. However, you may want to consult a professional adviser before making a decision. Find a local qualified adviser.

HMRC offers a Pension Schemes Online service - a secure method for businesses to register pension schemes and complete a number of forms and returns online. Some forms must be filed online using this service.