A limited company pension provides a tax-efficient way for the company to build your pension pot for retirement. According to the latest data, most companies in the FTSE 100 channel between 7.5% and 11.5% of the director’s salary to their pensions.
Navigating the intricacies of retirement planning, though, can be daunting, especially with fluctuating incomes and evolving tax regulations. In this article, we'll guide you through the top pension providers tailored for limited company directors.
From hassle-free transfers and investment diversity to tax-efficient contributions, we've done the research to address your unique needs. Discover how to secure a well-structured retirement plan that aligns with your financial goals, ensuring you don't miss out on essential tax advantages and growth opportunities for your future.
Top Pension Providers – Our Recommendation
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
7.6 | Visitii.co.uk | |||
8.3 | Visithl.co.uk | |||
7.9 | Visitajbell.co.uk | |||
6.0 | Visitpensionbee.com | |||
7.5 | Visitgetpenfold.com | |||
6.5 | Visitbestinvest.co.uk | |||
7.5 | Visitwww.moneyfarm.com/uk/ | |||
6.5 | Visitnetwealth.com |
Limited Company Director Pension Plans – Reviewed
Since limited company directors typically have fluctuating incomes, they don’t qualify for conventional pension schemes. Therefore, we examine the eight best pension providers for limited company directors.
Best for hassle-free transfers – Interactive Investors
Best for experienced investors – Hargreaves Lansdown
Best for low-cost custody charges – AJ Bell
Best for versatility – PensionBee
Best for ready-made funds – Penfold Pensions
Best for investment diversity – Bestinvest
Best for automated investing – Moneyfarm
Best for consolidating vast sums – Netwealth
We chose these providers because they offer flexible contributions, DIY pension schemes, ready-made funds, and actively-managed schemes suited to the unpredictable earning patterns of most limited company directors.
1. Interactive Investors – Best for Hassle-Free Entry and Exit
Monthly Fees | £12.99 for the Pension Builder plan |
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Transfer out fees | £0 |
Minimum contributions | £0 |
Pension options | SIPPs |
Flexible contributions | Yes |
As one of the leading online pension brokers in the UK, limited company directors can rely on Interactive Investor for no-frills account openings and exits.
One of Interactive Investor’s key selling points is no fees for account opening or closing, unlike AJ Bell, who charges a £9.95 transfer out fee.
The award-winning provider is the second-largest investment broker. They also offer the occasional signing-up incentives and cashback offers for transferring pensions, while SIPP account holders don’t pay monthly fees for the first six months.
- No charges for joining or leaving
- User-friendly website
- Fast and easy deposit and withdrawals
- Economical for large portfolios
- One of the largest community forums for DIY investors
- No investment advice
- Limited product portfolio
2. Hargreaves Lansdown – Best for Experienced Investors
Annual Fees | 0.45% yearly, capped at £200 |
---|---|
Transfer out fees | £0 |
Minimum contributions | $25 monthly, or £100 one-off |
Pension options | SIPPs, S&S, bonds, investment trusts, ETFs, gilt |
Flexible contributions | Yes |
Why would a limited company director choose Hargreaves Lansdown (HL) for their pension investing? Because they offer a wide range of investment options if you know your way around trading.
HL is the largest investment platform, providing a raft of personalised and DIY assets and products, such as SIPP, ISA, and S&S. Even if you’re not a savvy investor, you have an option.
As a limited company director, you probably have a fluctuating income. HL accommodates this by allowing you to stop monthly contributions during a rough patch.
- Personalized and DIY investing options
- Beneficial to persons with fluctuating earnings
- Robust research and analysis tools
- Wide range of investing options
- User-friendly platform
- High FX, trading, and management fees
- GBP as base currency limits international trading options
3. AJ Bell – Best for Low-Cost Custody Charges
Monthly Fees | 0.25%, capped at £10 per month (SIPP) |
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Annual Fees | 0.25% |
Transfer out fees | £9.95 |
Minimum contributions | £1,000 lump sum (£800 from your pocket, £200 tax relief) |
Pension options | SIPPs, Lifetime ISA |
Flexible contributions | No |
Investors should seriously consider AJ Bell’s 0.25% custody charges. Although it looks inconsequential next to one of the industry’s lowest offerings by PensionBee (0.28%), it adds up since pension savings are for the long term.
AJ Bell does not charge account set-up, inactivity, holding, or withdrawal fees, which is great for your investment.
Moreover, cash balances attract a minimum interest of 0.05% for balances above £10,000, which rises to 0.15% for amounts over £100,000.
- No account set-up, holding, inactivity, or withdrawal fees
- One of the best for smaller portfolios
- Interest on cash balances
- Intuitive investment platform
- Limited selection of investment products
- Fixed broker fee, not great for smaller portfolios
Name | Score | Visit | Support | Mobile | Security | Commission | Disclaimer | |
---|---|---|---|---|---|---|---|---|
7.9 | Visitajbell.co.uk | Phone, Live Chat, Email | Android, iOS | 2FA, Biometrics |
4. PensionBee – Best for Versatility
Monthly Fees | £0 |
---|---|
Annual Fees | 0.50%, - 0.95% depending on the plan (Preserve Plan lowest at 0.50%) |
Transfer out fees | £0 |
Account fee | 0.50% - 0.95% |
Minimum contributions | £0 |
Pension options | SIPPs |
Flexible contributions | Yes |
If you need a versatile way to contribute, PensionBee might be the way to go. PensionBee designed several plans suited to your investment goals, to which you can contribute as much or as little as you wish.
Savers can choose from high, medium, or low-risk plans (like Impact, Shariah, 4Plus, or Preserve Plans) invested across diversified countries and asset types (bonds, stocks).
You can transfer your pensions to PensionBee at no extra cost.
- Diversified investment options
- Suitable for beginners
- Low annual management cost
- Will consolidate all your pensions if you ask
- No combining, transferring, contribution, or withdrawal fees (early withdrawal fees apply)
- No trading platform for seasoned investors. Limited investment choices
- No investment advice
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
6.0 | Visitpensionbee.com |
5. Penfold Pensions – Best for Ready-Made Funds
Monthly Fees | £0 |
---|---|
Annual Fees | 0.58% |
Transfer out fees | £0 |
Account fee | 0.75% annually for Standard, Lifetime, and Sustainable plans; 0.88% on the Sharia plan |
Minimum contributions | £0 |
Pension options | SIPPs |
Flexible contributions | Yes |
Penfold Pensions provides a simple app offering a variety of ready-made pension portfolios, minimising the hassle of self-selecting or trading.
The App designers targeted it at self-employed people with fluctuating earnings who don’t have the time to dabble in trading and investing.
Penfold’s digital platform will consolidate all your pensions into one handy pension pot in readiness for you to consult and select the right plan in line with your investment goals. The provider also offers a £1,000 bonus for consolidating your pensions.
- Easy to set up
- Low-cost savings plans
- Vast assortment of ready-made funds
- Will consolidate all your pensions
- No trading platform. Limited investment options for trading experts
- Scarce educational resources or expert consultation help
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
7.5 | Visitgetpenfold.com |
6. Bestinvest – Best for Investment Diversity
Monthly Fees | £0 |
---|---|
Annual Fees | 0.4% for other investments, but a minimum of £120 annually, 0.2% for Ready made funds, a minimum of £120 yearly |
Minimum contribution | £50 on most plans, £100 for the rest |
Account fee | 0.4%, minimum £120 per annum |
Pension options | SIPPs |
Flexible contributions | No |
Bestinvest has operated in the investment industry for over 30 years, offering an extensive range of investment options good enough for any limited company director’s pension savings.
A look around the Bestinvest online platform reveals the award-winning provider offers a host of investment planning, investment advice, and financial planning services, ensuring a perfectly aligned customised pension plan suited to your savings goals.
Users can opt for DIY investments, ready-made portfolios, or seek financial advice from Bestinvest’s team of advisers before settling on a SIPP plan created from over 3,000 ETFs, funds, and shares.
- £250 cashback plus 50% discount on service fees for transferring your pension
- Pays transfer fees from the previous provider, up to £500
- No fees on fund dealing and initial transactions
- No annual limits on investing
- Convoluted fees structure
- High fees for DIY investments
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
6.5 | Visitbestinvest.co.uk |
7. Moneyfarm – Best for Automated Investing
Monthly Fees | £10.34 self-managed & £15.67 actively managed on the Classic plan, £11.25 self-managed & £15.83 actively managed on the Socially Responsible plan |
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Annual Fees | 0.45% on standard plans, 0.75% on actively managed funds |
Transfer out fees | £0 |
Minimum contributions | £100 |
Pension options | SIPPs, S&S ISA, General Investment Account |
Flexible contributions | No |
Like most other providers on this list, Moneyfarm is an online-only investing platform—with a twist.
The platform employs robo-advisers, facilitating automated investing and digital financial advice suited to casual investors. Automation enables investing with minimal human intervention.
Moreover, Moneyfarm uses a passive investment strategy to select or time the market, spreading funds across diverse assets like bonds, stocks, and cash. The firm has an investment team who will make the investing decisions.
- Set-and-forget investing process
- Low fees (0.25% - 0.75%)
- Simple approach to investing
- Free transfers and drawdown
- High minimum investment
- High minimum contributions
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
7.5 | Visitwww.moneyfarm.com/uk/ |
8. Netwealth – Best for Consolidating Vast Sums
Monthly Fees | £0 |
---|---|
Annual Fees | 0.85% (minimum £1,700) |
Transfer out fees | £150 |
Account fee | £150 pension provider charge, £75 income drawdown set-up charge |
Minimum contributions | £0 |
Pension options | SIPPs |
Flexible contributions | No |
If you do not desire to spend time trading and managing the investment and several sizeable pension pots that need consolidating, have a look at Netwealth. The provider has a professional investing team to handle pensions.
First, you’ll meet certified financial planners who will ask you a series of questions and provide suitable recommendations after establishing your savings goals. After receiving the advice, you’ll set up a customised pension plan.
The investment team will take it from there and set about achieving the savings target by trading on your behalf. Netwealth is the ideal provider if you don’t want to make monthly contributions.
Netwealth’s financial advisers will also be at hand to answer any queries you might have, although they will charge you for specific advice.
- Consultations with a certified adviser
- Wide array of customisable investment options
- Can trade in GBP, USD, and EUR
- Transfer and consolidation of your pensions
- Hefty administrative charges, but lower than traditional wealth manager
- Prohibitive minimum investment
Name | Score | Visit | Disclaimer | |
---|---|---|---|---|
6.5 | Visitnetwealth.com |
Director Pensions Explained
A director pension is an investment product designed for limited company directors to save for retirement. The goal is tax-efficiently transferring funds from the company to personal investment accounts intended for retirement.
How Do Pensions Work for Company Directors?
Pensions for company directors operate similarly to regular pensions but may include additional features and considerations:
Contribution: You can make pension contributions personally and through your limited company as your employer.
Annual allowance: This is the maximum, legally allowable yearly contribution. Exceeding this allowance attracts taxation.
Pension tax relief: Personal and employer contributions are tax-deductible.
Am I automatically enrolled in a pension scheme as a director?
Benefits of Company Director Pensions
Company directors can be employees and employers, with significant tax implications on pensions as outlined below:
The tax efficiency of director pension contributions
Making company director pension contributions has several tax benefits, including corporation pension tax relief and the potential for savings. Personal pension contributions benefit high-rate taxpayers more than basic-rate taxpayers.
Corporation tax relief on pension contributions
Company contributions are written off as allowable business expenses, lowering your corporate tax. On paper, this will reduce your company’s profits, but you will keep more money in the long run. You also don’t have to pay National Insurance contributions.
National insurance relief on pension contributions
Besides receiving corporation tax relief on premiums, limited company pension contributions are exempt from employer National Insurance contributions.
If you are subject to the 100% PAYE earnings rule, which limits funds you can put into a personal pension, this is a more tax-efficient option than making pension contributions yourself.
Other tax-efficient ways to employ cash as a company director
There are several tax-efficient ways to invest cash:
Dividends: These are discretionary and contingent on the company’s financial situation, so they are not subject to National Insurance Contributions.
Small-self-administered pension scheme (SSAS): As a family company director, you can establish SSAS for yourself and a select group of employees to provide family members with pensions and shares in the company’s assets.
Self-invested personal pension (SIPP): You can also consider SIPPs as they offer a wide range of investment options and flexibility, allowing for more frequent portfolio management and investing.
Company directors should consult professional advisers before making pension contributions and retirement planning decisions due to the complexity of pensions and tax laws.
Types of Company Director Pensions
A company director has a range of personal pension options at their disposal. All they have to do is settle on a defined contribution plan from a desired provider, be it a SIPP, stakeholder pension, traditional personal pension, or other fund, and pay the monthly contributions.
Traditional personal pension
A traditional personal pension is a defined contribution pension where the amount you contribute and how well your investment performs determines the amount you receive in retirement.
The plan offers three investment options:
Insurance company funds: An insurance company invests your money across various funds.
Cash: A low-risk investment yields lower returns than most other pension options.
Ready-made personal pensions: Pre-packaged plans. Promises lower fees and less involvement in the investing process.
Stakeholder pensions
A stakeholder pension is a defined contribution pension plan that allows for retirement savings through regular but low contributions.
The scheme is ideal if you need a basic pension plan strictly regulated to offer default investment funds, flexible contributions, low minimum contributions, unit and investment trusts, fee-free transfers, and capped charges.
However, a stakeholder pension has limitations in the investments it can hold, leaving you with fewer options than with other pension plans.
Self-Invested Personal Pension (SIPP)
SIPPs provide more investment options than traditional personal and standard stakeholder pensions. Due to the extensive list of assets and funds, these are best left to seasoned investors. Possible investment options include:
Unit trusts and investment trusts
ETFs
UK shares and bonds
Cash
National Savings and Investment products
Workplace pension options
A workplace pension is a retirement savings option set up by an employer, allowing directors to deduct pension contributions from their salary. Examples include group stakeholder pensions, SSAS, and Multi-Employer Pension Schemes.
Group stakeholder pensions
In this arrangement, you contribute to a collection of stakeholder pensions provided by the company. You will contribute to the pension as the company dictates, making an equivalent contribution.
Group stakeholder pensions offer flexible contributions, enhanced tax benefits, lower charges, and operate under more rigorous regulations than individual plans. However, they offer limited control and investment options which may not be ideal for directors.
Small Self-Administered Pension Schemes (SSAS)
An SSAS applies to a select group of company employees or directors, usually up to 11 employees.
The main perk of an SSAS is the greater freedom in choosing investment options for the scheme’s funds. An SSAS relies on trustees usually selected from the scheme members.
A pension plan trustee or scheme administrator is responsible for tasks like:
Scheme registration with pension regulators
Registering pension with HMRC
Filing required returns
Sorting tax benefits for contributions
Paying specific taxes
Multi-employer pension schemes
It’s an umbrella term for workplace pension schemes accessible to employees of different companies and run by a board of trustees. These schemes are a popular choice for auto-enrolment.
They pool funds from many companies, resulting in lower administrative costs and better investment opportunities for the members. They offer little wiggle room for personalised plans or involvement in investing, so they are not ideal for limited company directors.
Contribution Limits and Tax Relief
Contribution limits and tax relief are crucial aspects of pension planning, as they impact how much a company can pay into a director’s pension.
How much can a company pay into a director’s pension?
There is no limit on the amount a company can contribute to your pension and still claim pension tax relief, as long as it meets the “wholly and exclusively” test by HMRC and doesn’t exceed the company’s annual profits.
Some directors sell or buy UK businesses to fund their retirement, using the proceeds to boost their savings.
You can also make personal contributions to your pension, up to 100% of your salary.
How much can a director personally pay into a pension?
The annual pension allowance for a director for 2023-2024 is £60,000. The first £60,000 doesn’t count towards your annual allowance so you can contribute it to your pension.
Salaries and dividends can affect your yearly allowance. Dividends are worth £1 for every £3 of your salary. So if your yearly wages are £60,000 and £20,000 in dividends, your annual allowance reduces to £40,000.
Many directors use this strategy since a limited company can make unlimited contributions to a director’s pension. Even if the director’s salary is below £60,000, the company can contribute the full £60,000 annual allowance.
Tax relief for director pension contributions
If a company meets specific criteria, including not exceeding the annual allowance of £60,000 and being deemed “wholly and exclusively” for business purposes, contributions to a director’s pension may be exempt from taxation.
Basic-rate taxpayers automatically get 20% relief at source, while those paying the higher or additional rates must file a Self Assessment tax return.
Tax relief comparison for personal and company payments
Private pension contributions can attract up to 100% tax relief. Personal pension contributions are subject to tax relief based on their marginal tax rate.
Company pension contributions become pre-corporation tax and are not subject to national insurance or personal income tax.
When determining the amount of tax relief for either type of contribution, use the highest marginal tax rate of the contributor.
How to Choose a Provider for Director Pensions
You should consider these factors:
Cost Structures
Failure to appraise the charges could lead to surprise fees taking a huge chunk off your funds and profits.
For example, if you start with a small amount, a percentage fee may cost less than a fixed fee but will prove costly for more considerable sums. Opt for providers with a lower percentage rate as the pension fund grows.
You should also beware of hidden costs such as share trading price, funds transfer, and FX rates.
Minimum Contributions
These vary from provider to provider, with some charging as little as £1 while others charge several thousand. Ensure the minimum and initial contributions won’t strain your finances.
Investment Options
Investing needs and expertise vary widely, so lean toward providers suited to your abilities. For instance, choose a platform that offers managed funds or ready-made portfolios if you’re a novice investor.
On the other hand, an experienced investor would do well in a platform providing a wide array of asset classes, including funds, bonds, ETFs, and S&S.
Flexibility With Contributions
Limited company earnings typically fluctuate monthly, affecting your ability to meet set monthly contributions. Settle for a provider with flexible contribution options.
Best Picks for Various Needs
Best pension providers for high-earning directors
High-earning directors should reclaim their personal allowance by reducing their PAYE salary and depositing the rest as a pension contribution up to the allowable yearly limit, as this is more tax-efficient.
The best pension providers for high-earning directors include Netwealth, AJ Bell, HL, Moneyfarm, Bestinvest, and Interactive Investors. These platforms offer a mix of low fees for larger funds, diverse investment options, and actively-managed portfolios.
When deciding on a pension, the following are essential considerations:
Costs and penalties
Tapered annual allowance
Investment options
Alignment with investment goals
Best pension providers for experienced director investors
Account Fee | Buying and selling shares | Fractional shares? | FX rate | Transfer out fee | |
---|---|---|---|---|---|
Hargreaves Lansdown | 0.45% | £11.95 | No | Spot rate + 1% | Free |
AJ Bell | 0.25% | £9.95 | No | Spot rate + 1% | £9.95 |
Interactive Investor – Investor plan | £12.99 pcm | £5.99 | No | Spot rate + 1.5% | Free |
Bestinvest | 0.4%, min. £120 p.a. | £4.95 | No | Spot rate + 0.95% | Free |
Best director pension providers for ready-made funds
Here are the best director pension providers for ready-made funds.
Platform Fee | Fund Cost | Transfer out fee | |
---|---|---|---|
Pension Bee | 0.5% – 0.95% | 0.03% transaction cost | Free |
Netwealth | £150 | 0.70% | £150 |
Penfold | 0.75% | Free | Free |
Moneyfarm | 0.75% | 0.2% fund fee | Free |
How to Start a Company Director Pension
You are responsible for managing your pension, so here are quick guidelines:
How to Make Company Director Pension Contributions
You can make pension contributions in two ways:
Personal pension contributions: Contribute up to the annual allowance and receive tax relief at your highest marginal income tax rate.
Contributions via a limited company: The company may contribute up to the annual allowance to your pension plan. You can receive corporation tax relief because these qualify as business expenses.
Your marginal tax rate determines tax relief for salary contributions. While there are no limits on contributions, you will only receive tax relief on 100% of your income or £60,000.
The government lowered this limit to £3,600, including tax relief, for pension savers without incomes or incomes below £3,600.
How to Contribute via a Limited Company
Since employer contribution is an allowable expense, your company can receive tax relief up to 25% through contributions from pre-taxed company income.
The ‘wholly and exclusively’ test determines whether an employer’s pension contribution is tax deductible.
HRMC will also check whether pension contributions exceed your company’s annual profits and if your employees receive the same pension contributions as others with comparable responsibilities.
Company contributions are allowable business expenses. You can deduct these contributions from your corporation tax and save up to 19% for your business.
Additionally, you can save 13.8% since your company doesn’t have to pay National Insurance on pension contributions, which results in a 32.8% total tax savings.
Do You Need a Director’s Pension?
While the complexity of pensions and tax laws underscores the importance of seeking professional advice, one thing is clear: a well-structured director's pension can be a powerful tool for securing your financial future. By understanding the contribution limits, tax reliefs, and potential investment avenues, you can make informed decisions that align with your retirement goals and aspirations.
So, to answer the question, if securing tax-efficient, versatile, and well-funded retirement matters to you, then yes, a director's pension could be a crucial component of your financial strategy.