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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 used to be a cap of £117,600 salary per year beyond which a pension could not be provided. A conventional pension scheme would be used to provide the employee with the pension benefits that he or she was entitled to up to that pension cap of £117,600 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 £235,000 per tax year into a pension scheme for any employee, subject to an allowance for any contribution that the employee is making. 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% or even 50% Income Tax charge on the excess.
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