Summary

Executive Pension Plans (EPPs) in the UK are typically single-member or small occupational defined contribution pensions historically used by company directors and senior employees. They sit alongside Self-Invested Personal Pensions (SIPPs) and Small Self-Administered Schemes (SSAS) within the wider UK pension framework regulated by HMRC, the Financial Conduct Authority and The Pensions Regulator.

This article explains how an EPP is structured, the role of employer contributions, the corporation tax position under the wholly-and-exclusively test, the £60,000 Annual Allowance for 2025/26, taper rules for higher earners, carry forward and the relationship between EPPs and the modern Lump Sum Allowance of £268,275.

Key Takeaways

• An Executive Pension Plan is a UK occupational defined contribution pension, often single-member, established by a company for a director or senior employee.
• Employer contributions to an EPP can normally be deducted against corporation tax where they meet HMRC wholly and exclusively test and are commercially justifiable.
• Employers do not pay National Insurance on contributions to a registered pension scheme such as an EPP.
• Employer and member contributions count toward the member £60,000 Annual Allowance for 2025/26.
• The Tapered Annual Allowance reduces the £60,000 limit for individuals with adjusted income above £260,000, down to a floor of £10,000.
• Carry forward allows unused Annual Allowance from the previous three tax years, subject to scheme membership rules.
• Normal Minimum Pension Age is 55, rising to 57 from 6 April 2028; the Lump Sum Allowance is £268,275 and the Lump Sum and Death Benefit Allowance is £1,073,100.

Executive Pension Plans UK: What Company Directors Should Know

Executive Pension Plans, often shortened to EPPs, have a long history in UK retirement provision for company directors and senior executives. Originally promoted in the 1970s and 1980s as a way for closely held companies to fund tailored retirement benefits for their Leadership, EPPs are typically structured as occupational defined contribution schemes with one or a small number of members. They are registered with HMRC, regulated within the wider UK pensions framework and subject to the same Annual Allowance and Lump Sum Allowance rules as other registered pensions.

For 2025/26, Executive Pension Plans UK remain a niche but useful tool inside a director overall remuneration strategy. They can sit alongside Self-Invested Personal Pensions, Small Self-Administered Schemes and group workplace pensions. The most relevant features for directors are the ability for the sponsoring company to make employer contributions that are normally deductible against corporation tax under the wholly-and-exclusively principle, and the absence of employer National Insurance on pension contributions. This article sets out, in journalistic and educational terms, the key features company directors typically consider when reviewing an EPP, together with the headline 2025/26 figures and the regulators involved.

What an Executive Pension Plan Actually Is

In UK terminology, an Executive Pension Plan is generally an insured occupational defined contribution pension scheme set up by an employer, often a private Limited Company, with a small number of members. The most common form is a single-member EPP where the sole member is a controlling director. Historically these schemes were offered by Life insurance companies as packaged products, and some legacy EPPs remain in force today even though new sales have largely been overtaken by SIPPs and SSAS arrangements.

Because an EPP is an occupational pension, it is constituted under trust and falls under the oversight of The Pensions Regulator (TPR) as well as HMRC Pensions Tax Manual. The investments typically sit in a range of insured funds, although some modern EPP structures permit broader Investment choice. Like all registered pension schemes, contributions and investment growth benefit from the standard UK pension tax regime, and benefits are taxed under the same rules that now apply since the abolition of the Lifetime Allowance in April 2024.

Why Directors Historically Used EPPs

Owner-managed company directors often have flexibility over how they take income: salary, dividends, bonuses or pension contributions. Because employer pension contributions are not subject to employer National Insurance and can usually be deducted against corporation tax, they have long been an attractive lever for directors who do not need all of their profits as immediate income.

EPPs allowed directors to formalise this within a dedicated trust-based scheme tailored to their circumstances. Features typically included tailored death-in-service cover, the ability to fund large one-off contributions in profitable years and clear separation of the director retirement pot from group workplace arrangements for employees.

• Tailored contribution levels for a single director or a small executive group.
• Trust-based occupational structure separating director retirement Assets from the trading company.
• Historically packaged with life insurance and disability cover within one wrapper.
• Potential to use carry forward to fund larger contributions in profitable trading years.

Corporation Tax and the Wholly and Exclusively Test

The headline tax attraction of an Executive Pension Plan is that employer contributions are normally an allowable deduction against the company trading profits. HMRC guidance in the Business Income Manual and Pensions Tax Manual confirms that contributions to a registered pension scheme are generally deductible if they are paid wholly and exclusively for the purposes of the trade.

For controlling director arrangements, HMRC may scrutinise contributions where total remuneration appears disproportionate to the work performed for the company, or where contributions are made for connected persons such as a spouse who is not genuinely employed in the business. The wholly-and-exclusively test is therefore a factual question, and directors usually take advice from an Accountant or tax adviser before committing to large or unusual contributions.

Annual Allowance, Taper and Carry Forward in 2025/26

All UK registered pensions, including Executive Pension Plans, share the same headline Annual Allowance. For the 2025/26 tax year this is £60,000, covering total employer and member contributions, plus any deemed input from defined benefit accrual. Exceeding the Annual Allowance generally triggers an Annual Allowance charge at the member marginal rate of Income Tax on the excess.

Higher earners can be caught by the Tapered Annual Allowance. From 2025/26, where adjusted income exceeds £260,000 and threshold income exceeds £200,000, the Annual Allowance is reduced by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. Carry forward remains available for the three previous tax years, provided the individual was a member of a UK registered pension scheme in those years and current-year Annual Allowance has been used in full.

• Standard Annual Allowance 2025/26: £60,000.
• Tapered Annual Allowance floor: £10,000 once adjusted income exceeds £360,000.
• Carry forward: previous three tax years of unused allowance.
• Money Purchase Annual Allowance after flexibly accessing a DC pension: £10,000.

Lump Sum Allowance and Death Benefit Allowance

Since 6 April 2024 the Lifetime Allowance has been replaced by two new limits relevant to lump sum benefits. The Lump Sum Allowance (LSA) caps tax-free lump sums at £268,275, equivalent to 25 percent of the previous Lifetime Allowance. The Lump Sum and Death Benefit Allowance (LSDBA) is £1,073,100 and covers tax-free lump sums paid in life and on death.

For directors with large Executive Pension Plans, these allowances are critical. While contributions and investment growth above the LSA or LSDBA are no longer subject to a Lifetime Allowance charge, lump sums above the thresholds become subject to Income Tax at the recipient marginal rate. This has implications for legacy EPPs that have grown to substantial values, and for directors who hold transitional protections from earlier Lifetime Allowance regimes.

Accessing Benefits and Regulatory Oversight

Normal Minimum Pension Age in the UK remains 55 in 2025/26 and is legislated to rise to 57 from 6 April 2028. From that age, EPP members can usually take a Pension Commencement Lump Sum (subject to LSA), use drawdown, buy an Annuity or take Uncrystallised Funds Pension Lump Sums, depending on scheme rules.

Oversight of EPPs is shared. HMRC administers tax registration and reliefs. The Pensions Regulator supervises trust-based occupational schemes and Trustee duties. The Financial Conduct Authority regulates the financial advisers and product providers that arrange EPPs, and MoneyHelper, sponsored by the Money and Pensions Service, provides free guidance to members. Directors and trustees should keep abreast of changes flagged in Autumn Budget 2025 announcements and any subsequent Finance Bill measures.