Pensions for owner-managers

Employer contributions, the annual allowance and its taper, carry forward, and the April 2027 inheritance tax change, in enough detail to spot when a client needs an introduction.

£60,000
the annual allowance for 2026/27, with carry forward from the three previous tax years.
gov.uk, Tax on your private pension contributions
1

Where the decision is made

Pension decisions for an owner-manager are made in the remuneration conversation your firm already has. Salary, dividend and employer pension contribution are decided at the same meeting, and the accounts show whether an employer contribution has been made.

Your firm does not advise on pensions. Knowing the rules lets you notice when the pension option has not been looked at, and offer an introduction.

2

The rules

£60,000
the annual allowance for 2026/27
£10,000
the minimum the allowance tapers down to, for threshold income over £200,000 and adjusted income over £260,000
57
the access age from 6 April 2028, rising from 55
6 April 2027
from when most unused pension funds and death benefits count in the estate for inheritance tax

gov.uk, Tax on your private pension contributions; HMRC Pensions Tax Manual PTM057100; Finance Act 2022; Finance Act 2026.

Rates, allowances and taper thresholds change each year. Check the current year’s figures on gov.uk before quoting any of them.

3

Salary, dividend or employer contribution

How an owner takes money out of the company is a choice between salary, dividend and employer pension contribution.

Salary

Deductible for the company. Subject to income tax, employee’s national insurance at 8% above £12,570 (2% above the upper earnings limit) and employer’s national insurance at 15% above the secondary threshold of £5,000 a year (gov.uk, Rates and thresholds for employers 2026 to 2027). Maintains the state pension record.

Dividend

Paid from post-tax profit, with no national insurance. Taxed at 10.75%, 35.75% and 39.35% above the £500 dividend allowance for 2026/27 (gov.uk, Tax on dividends), and requires distributable reserves.

Employer pension contribution

Normally deductible for the company where the wholly and exclusively test is met, no national insurance, no income tax at the point of payment, and inaccessible until 55, rising to 57 on 6 April 2028.

An employer contribution carries no national insurance and no income tax at the point of payment, and the money cannot be accessed until the minimum pension age. Whether that suits the client depends on their age, their other resources and what they need the money for, and that judgement is regulated advice.

4

The traps

What to look for in the file

  1. A profitable company making no employer pension contributions at all.
  2. A director drawing the same salary and dividend they took five years ago while profit has doubled.
  3. A client approaching 55, or 57 from 6 April 2028, or approaching state pension age, with no review recorded.
  4. Several old workplace schemes mentioned in passing and never looked at.
  5. A sale on the horizon, where funding has to happen while the company is still trading.
A return on investment summary on a desk
5

What you can say

Wording you can use“The company is profitable and there has been no pension contribution for a few years. An employer contribution is one of the three ways of taking money out. Would you like me to introduce you to the financial adviser we work with, who can work out whether it fits?”

Describing the existence of the option is allowed. Telling the client how much to contribute, into what, or whether to consolidate old schemes is regulated advice and goes to the adviser.

When to raise it

The moments to raise it are the remuneration discussion, the approach of 55 or 57, and the point at which a sale becomes a possibility.

Raise it first with clients who have a profitable company, no meaningful pension and fifteen or fewer working years left.

Old workplace schemes

Consolidating old workplace schemes can lose guarantees attached to the old scheme. Never suggest a transfer, even informally, and never help a client compare two schemes, because both are regulated activities.

Financial planning for your clients, alongside the accounts and tax work

Equity & General is authorised and regulated by the Financial Conduct Authority. There is no charge to your firm, and we do everything to set it up for you.

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