The employer and the members may contribute to the scheme and it is also possible for third parties to make contributions. Rowanmoor’s Actuarial Department can provide guidance on the level of contribution necessary to fund for specific pension and tax-free lump sum benefits.
The maximum contribution, which can normally be paid to all pension schemes in respect of a member and receive tax relief in one tax year, is known as the annual allowance.
There is no limit to member contributions, which can include those from third parties, but tax relief will only be granted on contributions up to 100% of the member’s earnings in any tax year provided the member is under the age of 75 and a UK resident. If a member is or has been a Scottish resident, the tax relief they receive might be different. Tax relief cannot be claimed by third parties, making contributions on behalf of a member, but will be treated for tax relief purposes as if they had been paid by the member. Tax relief is also limited by the annual allowance, which may include the total of the current annual allowance and any unused qualifying annual allowance carried forward from previous tax years. Any member contributions will usually be deducted by the employer direct from pay, but other methods of contribution may be permissible.
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. In addition, tax relief on the employer’s total contributions to all registered pension schemes will be spread if they are over £500,000 and constitute an increase of 210% or more over the previous year’s contributions. The employer’s accountant should advise on these aspects.
If the total of the employer’s contribution for a particular member plus the member’s personal contribution exceeds the annual allowance and any unused qualifying annual allowance carried forward from previous tax years, then the member will have to pay tax on it. We will ensure that if any employer contributions, which are due, are not received in the specified time members are advised of any non-payments in line with The Pensions Regulator’s code of practice.
Please note that a member’s fund must be tested against the lifetime allowance when they take benefits and again at age 75. If the lifetime allowance is exceeded, there will be an additional lifetime allowance tax charge unless the member has the necessary pension protection.
This information relates to the Rowanmoor SSAS. If you would like to know more details regarding the information provided on this page please send your questions via the enquiry box on the right hand side or email us. Alternatively please visit our SSAS literature library.