Advantages for a Company Director buying property
A company director with over 5% shares in the company can use a pension mortgage to purchase a property in their own name, yet effectively have the company pay for it.
You take out a personal mortgage on which you make the interest payments. At the same time the company sets up a pension on your behalf which, at retirement can be used to pay off the mortgage. The company receives full corporation tax relief on the pension contributions.
The amount of money a company can pay into a pension plan on behalf of a director depends on your salary, the length of time you have been with the company and when you intend to retire. The table below gives you a guideline on how much a company can pay for a married male retiring at 60 who has not made any previous pension contributions through that company.
| Aged Next | Estimated % of salary qualifying for tax relief |
|---|---|
| 30 | 31.2% |
| 35 | 39.0% |
| 40 | 50.5% |
| 45 | 69.2% |
| 50 | 105.5% |
| 55 | 199.1% |
| Assumes married male with salary increasing at 6% a year. Pension age is 60. Investment yield 8% per year. Annuity rate 5% Source: The Professional Jan/Feb 2002 | |
The amount of money that can be paid to a pension is very substantial and allows you to build up a large retirement fund, from which to pay off your mortgage.
You can retire and pay off your mortgage any time between age 60 and 75.