Cash Extraction for Directors

Shai PatelGeneration Financial Services

AgendaAbout Generation

Pensions - SASS, SIPP & Flexible Retirement

Enterprise Investment Schemes

Venture Capital Trusts

Pension Plans

Still one of the most tax efficient forms of investment saving in the UK.

The advantages

Tax efficient; tax free cash at 25% tax free growth (almost) can be low or high risk (fund selection)

HMRC and Government are supportiveEstablished sophisticated market placeInvest in commercial propertyLoan back funds to Company

Pension Plans

The disadvantages

You need to be over 55 to access fundsAdvice / administration needed – product and fundProcess driven – forms, admin, timeTax on exit (planning opportunity)Cost (fees and charges)Earning over £150,000 per annum Max allowance £1,000,000 (April 16)

Example: Pension Salary or Dividends

Corporation Tax

Employer National

Insurance

Employee National

Insurance

Income Tax (assuming 25% tax Free cash)

Dividend TaxPer £1000 of

business profit in your pocket

Percentage effectiveness

against pension

Basic Rate

Salary 0% 13.8% 12% 20% 0.0% £597.54 70.30%

Dividend 20% 0% 0% 0% 7.5% £740.00 87.06%

Pension Contribution 0% 0% 0% 15% 0.0% £850.00 100.00%

Higher rate

Salary 0% 13.8% 2% 40% 0.0% £525.48 75.07%

Dividend 20% 0% 0% 0% 32.5% £540.00 77.14%

Pension Contribution 0% 0% 0% 30% 0.0% £700.00 100.00%

You will need income when you retire, so don’t be like Mr Grimley!

Perhaps a mix of all three is the better option

£100,000 profit available for remuneration – 2015/16

Salary & Dividend & Pension up to

Annual Allowance

£7,000

£42,400

£40,000

SALARY

DIVIDENDS

PENSION

BANK

£46,762

PENSION £40,000

HMRC £13,238

SALARY£7,000

£74,400DIVIDENDS

£0PENSION

Salary & Dividend

BANK £70,762

HMRC £29,238

PENSION

£0

DIVIDENDDIVIDENDSWAP?SWAP?

Bank£70,762

Bank£46,762

Before After

Pension£0

Pension£40,000

£40,000£40,000@ 20% = £34,000@ 20% = £34,000@40% = £28,000@40% = £28,000

£24,000

@20% = 42%@40% = 17%

RISK FREE RETURN?

Summary

The route to take is dependent upon what you wish to do with extracted cash.

Suggest a mix of options

Consider appetite to risk?

Appetite to tax savings in general?

Team approach – advice from Barnes Roffe and GFS

Free initial consultation

Legal and Compliance

These slides are intended as an overview of your employers pension scheme and the new pension rules and are based on our opinion of the subject and our understanding of the rules as currently published.

The Generation Financial Services Limited is authorised and regulated by the Financial Conduct Authority Limited and is Registered in England and Wales No. 6572193. Registered address: Charles Lake House, Claire Causeway, Crossways Business Park, Dartford, Kent DA2 6QA.