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Financial > Pensions > FURBS
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These initials stand for a Funded Unapproved Retirement Benefit Scheme and are of interest to only a tiny proportion of people in the UK.
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Mainstream pension provision has been extended to the point where these schemes are unlikely to be needed for the foreseeable future, but their existence arose from the need to provide a pension beyond the old limits that used to be available.
For example, there was a cap of £104,000 salary per year beyond which a pension could not be provided. A conventional pension scheme was used to provide the employee with the pension benefits that he or she was entitled to up to that pension cap of £104,000 and the remainder of any salary package was pensioned through a FURBS.
These schemes allowed an employer to set money aside to provide benefits for named employees in retirement that could be taken without any tax liabilities as a single lump sum. The employee suffered an Income Tax and National Insurance charge at the time money was paid into a FURBS because it was treated as a Benefit In Kind, but the employer enjoyed tax relief from the contributions because they were a legitimate business expense.
The need for such schemes has almost completely disappeared today because employers can contribute up to £225,000 per tax year into a pension scheme for any employee. Consequences for any employer contributing more than that is that tax relief would not be granted upon the excess contributions into a mainstream pension and the employee will suffer 40% Income Tax charge on the excess.
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