Should you use a Family Investment Company alongside your pension?
Pensions remain one of the most tax-efficient ways to save, thanks to tax relief on contributions. What has changed is their role in passing on wealth: from April 2027, most unused pension funds will count towards the estate for inheritance tax.
How does a pension compare with a FIC?
- Contributions: pensions get income tax relief up to the annual allowance (generally £60,000, tapered for high earners). There is no tax relief on putting money into a FIC.
- Growth: both grow largely free of personal tax — pensions entirely, FICs subject to corporation tax on income and gains, with most UK dividends exempt.
- Access: pensions are usually locked until age 55, rising to 57 from 2028. A FIC can repay founder loans at any time.
- Passing on: from April 2027 pensions are usually in the estate. FIC growth shares held by children are outside it from the start.
How are families combining the two?
- Continuing to use annual pension allowances where tax relief is valuable.
- Investing surplus capital above those allowances through a FIC, with children holding growth shares.
- Drawing pension income and making regular gifts from surplus income, which can be exempt from inheritance tax immediately.
- Reviewing expression of wishes forms and who will pay any tax on pension death benefits.
Frequently asked questions
Not usually for contributions within your allowance, because pensions get income tax relief. A FIC is more often used alongside a pension for larger sums.
From 6 April 2027, most unused pension funds and death benefits will be included in the estate for inheritance tax.
A company can make employer pension contributions for its directors, but for a pure investment company this needs careful advice on whether the payments are deductible.
Not necessarily. Tax relief on contributions is still valuable. Review your overall plan with an adviser.
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