Employer Funded Unapproved Retirement Benefits Schemes (EFURBS) don’t offer the same tax advantages as approved pension funds. But there are “no set limits” on your company’s contributions or “what the money can be invested in”, says Tax Tips and Advice.
Although “your company won’t get a tax deduction for the year it makes the contribution”, it will receive relief when payments are made out of the fund to you and any other beneficiaries. You will pay tax on payments as you would with any other pension income.
EFURBS can also be a tax-efficient way to borrow from your company. If, say, John were to borrow money from his firm, Acom Ltd, Acom will have to pay tax equal to 25% of the loan. This will be repaid, but only when John settles the loan, which could take years.
“Instead, John can borrow the money from the EFURBS Acom set up for him.” He’ll avoid the 25% tax and although he’ll have to pay interest on the loan, this will go into the EFURBS and “will find its way back to John when he takes his pension”. Note, the EFURBS must be set up to allow loans.