Unlike many other celebrities, Santa is an all-round good guy who has resisted the temptation of using his Lapland base as a tax haven.

He’s taken the decision to be fair to everyone, so he pays tax on the income he earns in all the countries where he does business. You won’t be reading about Santa in the Paradise Papers…

While this means that he hands over a chunk of his income to HMRC, he can mitigate his tax bill by investing in a pension, which comes with tax relief on his contributions.

How does that work?

The contributions Santa makes into his pension scheme are paid net of basic rate tax relief. The pension provider will claim back basic rate tax at 20 per cent from HMRC adding this to Santa’s pension pot. So for every £80 that Santa pays, the taxman will make a top-up payment of £20.

It’s difficult to work out exactly how much Santa earns – his accounts don’t seem to be available at Companies House – but I think we’re on safe ground to assume that he’s a relatively high earner. So as he’s a higher-rate taxpayer, he can claim back a further 20 per cent on his pension contributions via his tax return.

(Santa hates January, by the way. Not only is he absolutely shattered immediately after Christmas – not least because of all the sherry he’s necked – he only has until 31 January to submit his tax return from the previous tax year. If he misses that deadline, he’ll get a fine from those same nice HMRC people he showered with gifts just a few weeks earlier.)

So not only will his pension provider claim back £20 from the government for every £80 he contributes to his pot, he will get another £20 back through his tax return. Ultimately, Santa pays £60 towards his retirement savings and the government pays a further £40.

If he were to sell his business and continue working for the new owner, he would also receive pension contributions from his employer. But for now, there’s no suggestion that Santa is planning to sell up.

But there are limits

While he is working, Santa can’t chuck all his money into a pension plan. Well, he could, actually, but it wouldn’t be tax-efficient to do so. That’s because the government has capped tax relief on annual contributions to £40,000 (assuming Santa’s income doesn’t result in him having a lower annual allowance).

Any contributions above this figure would face an annual charge.

If Santa benefited from employer contributions to his pension savings, they would be included in that £40,000. But I think he’s likely to stay self-employed so that’s not an issue for now.

Planning his contributions

Santa receives all his money in one go – just after Christmas – and he isn’t an all-year-round earner, so he needs to put some savings aside when he gets the chance.

It can be tempting for self-employed people to put off their contributions until next month, but Santa doesn’t have that luxury. If he blows all his earnings in the January sales, he won’t get the chance to top up his pension pot for another year. The beauty of compound interest means that money he saves earlier in his career has a chance to grow much more than money he puts aside later on, so delaying his contributions even by just a year could give him a much-reduced pension during retirement.

Meanwhile, although Santa seems to have cornered the festive market for sleigh deliveries, he should not assume that will always be the case. Amazon is sure to have plans to launch a rival sometime soon, so he would do well to make pension contributions now, while he can still afford it.

Looking after the elves

Thanks to auto-enrolment, all of Santa’s little helpers have pension plans, too. The government began rolling this out a few years ago in a bid to help fill the pensions gap. It’s unlikely that many people will enjoy the retirement lifestyle they covet if they rely simply on the State Pension, but too many were failing to make additional arrangements.

There are some exceptions to how it works, but let’s assume that all the elves are at least 22 but haven’t yet reached State Pension age, and they earn more than £10,000 a year. That means they are automatically enrolled into a pensions scheme that Santa must, by law, offer them.

He doesn’t need to do all the hard work himself – he’ll have a pensions manager for that – but he must have a scheme available for them.

The elves can choose to opt out of the scheme, but Santa is not allowed to encourage them to do so, and he is not allowed to dock their pay to make up for the money he’s putting aside for them.

At the moment, the total minimum contribution to an auto-enrolment pension scheme is two per cent of everything an elf earns between £5,876 and £45,000. That is made up of one per cent from Santa (the employer), 0.8 per cent from each elf (the employee) and 0.2 per cent tax relief (the government).

These figures will go up over the next couple of years, and by April 2019 the overall figure will be eight per cent. Each elf will pay in four per cent of his earnings, with Santa paying a further three per cent, and one per cent coming from tax relief.

There are some worries that this might persuade some of the elves to ditch their pension savings, but they should think very carefully before opting out of the scheme. A little bit put aside today can pay off handsomely in the future, and a comfortable retirement is what every hardworking elf deserves.

Alan Morahan is managing director, DC Consulting, Punter Southall Aspire