There are a number of ways to build retirement savings in a self-invested personal pension. Here is a detailed explanation of member and employer contributions, and the available tax relief.
Members, their employers, and other third parties can contribute to a self-invested pension. Contributions to SSAS or Family Pension Trusts are made by the employer, often with guidance from our actuaries to determine the funding required for specific pension and tax-free lump sum benefits.
There is no limit to the contributions members or other third parties can make, however tax relief will only apply if the member is under age 75 and a resident in the UK. The tax treatment of Scottish residents may differ.
All contributions paid into our SIPP and Family Pension Trusts should be net of basic rate tax and the total tax relief available cannot be more than 100% of the member's earnings in any tax year.
Tax relief is also restricted to the member’s available annual allowance in the tax year. The annual allowance for 2017/2018 is £40,000 per annum. Where a member has unused qualifying annual allowance from up to three previous tax years, this can be carried forward.
Members who do not have earnings may contribute up to £3,600 gross (£2,880 net) in each tax year.
Employer contributions are unlimited and will receive tax relief in the year they are made, provided they are wholly and exclusively for the purposes of the employer’s trade.
If the total employer’s contribution for a member plus the member's personal contributions exceed the annual allowance and any unused annual allowance carried forward from previous tax years, then the member must pay tax on it.
We will advise members of any employer contributions that fall due but are not received at the specified time, in line with The Pensions Regulator’s code of practice.
A member's total pension fund must be tested against the lifetime allowance when their benefits are taken and again at age 75. If the lifetime allowance is exceeded, an additional tax charge will apply unless the member has the necessary pension protection.