Can I contribute to a SIPP or SSAS pension?
Many people have made the decision to take control of their frozen or indeed existing pensions and transfer these funds into either a SIPP (Self Invested Personal Pension) or SSAS (Small Self Administered Scheme) pension which in turn gives them the flexibility to consider a wider range of investments including property.
Having taken the initial step of transferring funds already invested in pensions into a SIPP or SSAS the question then arises “Can I continue to contribute to my pension?” The simple answer to that question is YES and there are a number of reasons why this may well be a very prudent decision.
Tax Relief On Contributions
Contributions to SIPP and SSAS pensions are treated under the same rules as any other money purchase pension scheme and therefore attract tax relief at the highest marginal rate. Personal SIPP contributions are paid net of basic rate tax relief and the SIPP provider then reclaims the basic rate tax relief from HMRC. Any higher rate tax relief is simply claimed through an individuals annual self assessment return. Personal contributions to a SSAS can with many SSAS providers be made in the same way or paid gross through the employers PAYE system.
How much can I contribute?
The personal limit for which you will receive tax relief on contributions to either of these types of pension is limited to 100% of your “UK relevant earnings” in any tax year up to a maximum of £40,000. Once an annual allowance for a current tax year is utilised there is the facility to “carry forward” any unused allowance in any of the last 3 tax years which many individuals find of benefit if, for any reason they have neglected their pension planning in that time.
Can my company pay in?
As many people, including property investors now operate their business through their own limited company this question is often asked. The rules change somewhat when a company contribution is made as an employer can make an unlimited gross contribution and receive corporation tax relief. To qualify for tax relief the contribution must be wholly and exclusively for the purpose of the business and not solely for the purposes of tax benefits as the contribution is an allowable business expense. While this scenario is not the norm for the majority of individuals it would be advisable to seek advice from a qualified accountant or tax consultant before making any decisions with regard to this.
As previously mentioned, having made the decision to take control of your existing or frozen pension(s) to increase your pension fund value why would anyone limit the opportunity and the tax advantages of making contributions purely to a transfer of any existing funds when you can continue to increase your fund with ongoing contributions?
If you’d like to find out more about how TLPI could help you grow your retirement fund call us on 020 3907 8400 to speak with one of our experienced consultants.