sipp

Contributions

There is technically no limit to how much you can contribute to your plan – but there is a ceiling on how much qualifies for tax relief.

For members who have no relevant UK earnings in a tax year, or for members who are no longer resident in the UK (as long as they were resident in the UK both in the year of membership and within 5 years of the tax year when a contribution is made), the maximum gross contribution for tax relief is £3,600.

However, if you have UK relevant earnings, you can get tax relief of 100% of your earnings on your contributions up to the annual allowance. The annual allowance for 2011/12 is £50,000.

Furthermore, where there has been unused annual allowances in any of the three previous tax years, it may be possible to carry these forward to be used in the current tax year. 

Employers’ contributions
Your employer can also make contributions on your behalf – and they will usually be able to claim these contributions as a business expense. Employers may also be able to make contributions worth more than your earnings, though they should consult with their inspector of taxes before proceeding.

“In Specie” contributions
If you hold an asset you’d like to contribute to your SIPP, you can do this by doing an “in specie” contribution. This means you agree a monetary contribution, then settle that amount with a transfer of assets. Your employer may also choose to make a contribution to your SIPP in this way.

Please note: HMRC deem an ‘in specie’ contribution as a sale and purchase. Any capital gain at the time of making the contribution needs to be paid. Care must be taken to ensure any in-specie contributions satisfy HMRC’s requirements. We, therefore, strongly recommend anyone considering an in-specie contribution consults their financial adviser in advance.

The value of your investments can go down as well as up and you may not get back the full amount invested.