PENSIONS

Executive Pension Plan

Your retirement might still be some years away, but it’s always wise to begin planning early

Director / Executive Pension Plan (EPP)

An Executive Pension Plan (EPP) is a company-sponsored, money purchase (defined contribution) occupational pension scheme. An employer establishes it to provide retirement benefits for specific directors or key employees. The employer usually makes contributions, although employees can also contribute, creating a tax-efficient fund for retirement.

These plans are established under a trust, with trustees appointed to manage the day-to-day operations. Their responsibilities include ensuring contributions are paid correctly, the scheme complies with pension law, and benefits are paid promptly.

For an employer, an EPP can be a valuable component of a benefits package aimed at attracting, motivating, and retaining key talent.

The financial benefits are also substantial:

For the individual member, an EPP offers several benefits:

Personal contributions receive tax relief, subject to standard pension allowances.
Contributions and investment growth are shielded from income and capital gains tax.
At retirement, you can typically take up to 25% of your fund as a tax-free lump sum.
The remaining fund can be used flexibly, for options like purchasing a guaranteed income (an annuity) or keeping it invested and drawing an income as needed (flexi-access drawdown).

Contributions and benefits

EPPs provide some level of investment choice, though this varies depending on the specific plan. As with any investment, the value of the fund can both fall and rise. All contributions and benefits are subject to pension allowances, such as the Annual Allowance and, if you have already begun receiving a flexible income from another pension, the Money Purchase Annual Allowance (MPAA).

Members can access their benefits from age 55 (rising to 57 from April 2028), providing flexibility to retire earlier or later than the company’s usual retirement age, subject to the scheme rules.

THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED. TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.