Originally published in Communiqué –
the Bachmann Group newsletter, February 2010
Scott Clayton, Director at the Bachmann Group, explains
Employer Funded Retirement Benefit Schemes (EFRBS).
The changes to pension legislation implemented on 'A'
Day in April 2006 introduced the distinction between registered and
unregistered schemes where a distinction between approved and
unapproved pension schemes had once existed.
Unregistered or unapproved pension arrangements in the UK
essentially resulted from company requirements to 'top-up'
executive or high earner pensions when the earnings cap for an
approved pension had been reached. Employer Funded Retirement
Schemes (EFRBS) are such a vehicle.
An EFRBS is an alternative arrangement to a UK registered scheme
that is not subject to the rules that make UK registered pension
schemes unattractive for high earners.
The 2009 Finance Act placed pension provision for those
individuals earning in excess of £150,000 per annum firmly
under the spotlight. The budget declared that from April 2010 the
higher rate of income tax would be 50% for those earning in excess
of £150,000. Since April 2009 special provisions have also
applied to prevent those affected from 'loading' their
pension contributions before tax relief for their pension
contributions is tapered off in April 2011. Consequently,
registered pension schemes have become unattractive.
It is a challenging situation and has forced many organisations
to re-evaluate the pension options they use, and to consider
whether a more flexible arrangement is available to them. EFRBS
provides one of these options.
Designed for those individuals who wish to accumulate benefits
outside of the registered pension environment, an EFRBS is not
subject to the pensions taxation regime set out in the UK Finance
Act 2004 and offers tax efficiency and flexibility that is not
necessarily available from other pension products.
Contributions to these schemes are not subject to the Annual
Allowance Charge, tested against the members post 'A' Day
Lifetime Allowance, nor is there a UK income tax liability for the
EFRBS member. Whilst ultimately benefits drawn as income or as a
lump sum from the EFRBS are subject to UK income tax, as employment
income there are opportunities for EFRBS members to take loans
which can be more tax efficient for many individuals. The employer
can claim a deduction for corporation tax purposes when taxable
benefits are drawn.
In addition to these favourable features, an offshore EFRBS also
enables any foreign income and gains to be accumulated free of UK
taxation and offers possible benefits to those individuals
intending to be a non UK resident in their retirement as benefits
can be drawn in their chosen jurisdiction which may offer
preferential levels of taxation.
Other benefits include:
Flexibility of investments. Trustees of an EFRBS have full
control of investments. Therefore, many of the restrictions on
investments that are faced by registered pension schemes are not
Preservation of wealth. As there is no requirement to purchase
an insurance annuity and pension proceeds can be fully distributed
to beneficiaries following death.
The EFRBS plans offered by the Bachmann Group are administered
from the highly regulated and HMRC recognised jurisdiction of
Guernsey and provide a flexible and tax efficient option for
employers and employees to a UK registered scheme.
The creation of an EFRBS requires specialist advice and Bachmann
Group is pleased to be able to work with a client's existing
advisers or introduce an appropriate adviser from their network of
April 2015 saw the reshaping of family-friendly leave with the birth of Shared Parental Leave (SPL). Can employers offer enhanced contractual pay to mothers/primary adopters but not to fathers/partners?
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