Contributions
IPM can accept personal contributions and employer contributions.
Ad-hoc contributions can be made to the scheme by way of cheque or telegraphic transfer (only by prior agreement with IPM), whereas regular contributions are collected by standing order.
There is no limit on the amount that can be contributed to the IPM Personal Pension Scheme in any one year.. However, tax relief is only received on personal contributions of up to 100% of earnings and anything in excess of the annual allowance will not attract tax relief.
These contribution limits are in respect of all contributions and benefit accruals (under a defined benefit pension scheme) to all pension arrangements and include personal and employer contributions.
Tax Relief
Eligible individuals can pay personal contributions of up to 100% of their earnings into the IPM Personal Pension Scheme, subject to a maximum of the annual allowance.. All personal contributions are paid into the scheme net of basic rate tax, currently 20%.
Upon receipt of such a contribution, IPM will process the cheque same day and have this credited to the client’s designated Bank of Scotland account.. IPM will then make a reclaim from HMRC for 20% for the basic rate tax.. The reclaim payment typically takes 6-8 weeks from IPM making the application.
If the individual is a higher rate tax payer, they are able to reclaim additional tax relief through their local tax office, usually by completing a self assessment tax return.
For employer contributions, all contributions must meet the ‘wholly and exclusively for the purposes of trade’ rule as defined in section S.74 of the Income and Corporate Taxes Act 1988.. Independent advice with the employer’s accountant should be sought for further clarification on this point.
Back to top
In-Specie Contributions
The principal of an in-specie contribution is the same as making a monetary contribution to the SIPP however the contribution is made by a transfer of assets, not the payment of cash. Unfortunately it is not quite as simple as transferring an asset.
We have strict procedures in place which have been devised in accordance with HMRC requirements to ensure that tax relief is given on the contribution.. Failure to follow these procedures may result in the loss of tax relief on the payment.
Due to the complex nature of in-specie contributions the only asset IPM will accept is commercial property.. IPM reserves the right not to accept an in-specie contribution if it does not satisfy the criteria as set out by HMRC.
A time cost is made for contributions paid this way.. Please contact us for further information.
Back to top
Annual Allowance
The annual allowance is a limit on all contributions made to all registered pension schemes in a single input period.. Any payment made on a client’s behalf that exceeds the annual allowance is subject to the annual allowance charge.
The annual allowance for 2011/12 onwards has currently been set at £50,000. However it may be possible to contribute in excess of this amount if you have any carry forward of unused relief from previous tax years. Independent financial advice should be sought prior to carry forward being utilised.
Please note any benefits that accrue in a defined benefits scheme will use up some of the annual allowance – the amount of the annual allowance utilised will be advised by the administrator of the scheme on an annual basis.. Please note that the amount of annual allowance used up as a result of active membership of a defined benefit scheme will not be the same as the contribution rates paid in by an employer or employee.
Back to top
Pension Input Periods (PIP)
The pension input period commences on the day the first contribution is made to the SIPP and runs for one year.. Any contributions paid during that period are assessed against the annual allowance for the year in which the pension input period ends.
Back to top
Lifetime Allowance
The lifetime allowance is a monetary amount that an individual can have saved into all registered pension schemes at the time they start to draw pension benefits, without any tax liabilities.. When a member decides to draw benefits from the SIPP (a benefit crystallisation event) a test against the lifetime allowance is performed to see if the value of the benefits being taken plus any other pension benefits already in payment exceed the lifetime allowance.
The value of any benefits in excess of the lifetime allowance is subject to a tax charge (the lifetime allowance charge) unless the member has applied for primary or enhanced protection – in which case the tax charge may not apply.
The lifetime allowance for 2011/12 has been set at £1.8 million. From 2012/13 onwards the lifetime allowance has been set at £1.5 million. For individuals with pension benefits between the £1.8 million and £1.5 million limits there is an option to apply for fixed protection from HMRC. An independent financial adviser should be consulted in this regard.
I.P.M. SIPP Administration Limited, Cambridge House, Campus Six, Caxton Way, Stevenage, Hertfordshire SG1 2XD
Tel 0845 130 3443 Fax 0845 230 3443
email info@ipm-pensions.co.uk
I.P.M. SIPP Administration Limited is authorised and regulated by the Financial Services Authority.
© Copyright 2010 IPM SIPP Administration Limited. All Rights Reserved.