The impending introduction of the new stakeholder schemes and the DC tax regime will provide more opportunities for pension planning both before and after 6 April 2001. We have already witnessed the introduction of legislation covering the introduction of stakeholder pensions, the new defined contribution tax regime, pension sharing and bankruptcy. Despite this the Budget has announced a number of important changes which will have far reaching affects particularly for final salary occupational schemes.
13.1 THE EARNINGS CAP
A number of directors will have a keen interest in reducing both corporation tax (and also employer's National Insurance) and personal levels of income tax. In particular a number may enjoy a high level of earnings that exceed the earnings cap. The Chancellor has announced that the earnings cap will increase to £95,400 for 2001/2002.
In respect of earnings over the earnings cap serious thought should be given to Funded Unapproved Retirement Benefits Schemes (FURBS). Whilst these arrangements offer no special initial corporation tax, NIC or income tax benefits (the contributions, usually, being deductible but assessable to income tax and, within the normal limits, NIC) they can offer
- an income tax and capital gains tax reduced home for investments
- IHT free payout to dependants on death of a member before taking benefits
- benefits wholly in cash