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Members, their employers, and other third parties can contribute to a self-invested pension. Contributions to Family Pension Trusts are made by the employer.

Member contributions

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 2020/2021 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.

Please note, the member may be subject to a lower limit in certain circumstances:

  • if their earnings are sufficiently high then the Tapered Annual Allowance may apply, reducing the limit by £1 for every £2 their adjusted income exceeds £240,000 (down to a minimum of £4,000)
  • if they have accessed their pension flexibly then the Money Purchase Annual Allowance will apply, reducing the limit to £4,000

Members who do not have earnings may contribute up to £3,600 gross (£2,880 net) in each tax year.

Employer contributions

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.

Is there a limit on the size of a self-invested pension scheme?

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.

If you have any specific queries please get in touch. Alternatively, visit our document library.