SSAS - 'unallocated' contributions

PippaO

Hi

Quite a technical question here, maybe one for a pension technician or tax specialist - but here goes...

Anyone know anything about unallocated pension contributions in a SSAS, or had experience dealing with them?

A 2 member SSAS has an 'unallocated' contribution sitting in a general fund. Basically this was an employer contribution made some years ago that was never allocated to either member - perhaps because the employer didn't provide the scheme admin with the relevant allocation % at the time or the fund split wasn't known. Unallocated contributions are permitted, but it's my understanding that the rules surrounding future allocation are complex. From the PTM https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133500, it appears you can only allocate the 'permitted maximum', otherwise it's an unauthorised payment charge. The PTM says the 'permitted maximum' is the maximum amount of relief available to the member in the tax year in which the allocation of contributions takes place less any contributions paid by the employer in respect of the member in that same tax year, divided by the number of pension schemes they have.

The SSAS' view is that the permitted maximum is the member's relevant earnings - but if it was a past employer contribution then why would it now be linked to relevant earnings? Would the "maximum amount of tax relief" not be linked to the wholly & exclusively limit, limited to the members unused annual allowance (+ carry forward relief)?

I also understand the growth (in excess of the original unallocated contribution) may be treated differently, but can't find any reference to this anywhere.

As I said, quite a specialist query - it may be no-one can help here, but someone may be able to point me in the direction of a good SSAS expert.

Thanks
Pippa

les_cameron

Good luck.

Making large contributions unallocated was a bit of a thing for a while as you got the full corporation tax relief and then you drip fed the allocation to prevent AA issues.

I had a look at this a while ago and I came to the conclusion the SSAS provider said. The guidance is quite clear there. Don't apply logic it'll get you nowhere fast in the pension world sometimes.

PippaO

Thanks Les. Good to know you're on the same page as the SSAS provider.
I'm at the Technical Insight event in Leeds tomorrow so will see you there.
There's a technical bod from Denton's Pensions presenting so I might ask him his views as well, especially about the growth aspect.

les_cameron

OK

You'll not see me though you'll see Barrie of Barrie's bond school fame - I'm off cycling in Northern Spain.

Yes Mr McPhillips. I'll warn him for you

PippaO

Thanks Les for forewarning Mr McPhillips, he covered the query in depth, so that’s much appreciated.
Basically the PTM rules are ambiguous but his interpretation is more along the lines of mine I.e the permitted maximum is simpky the member’s available AA in the tax year of allocation (less ER contributions already made).
Growth aspect is even less clear, basically down to provider discretion!

les_cameron

@PippaO said:
Thanks Les for forewarning Mr McPhillips, he covered the query in depth, so that’s much appreciated.
Basically the PTM rules are ambiguous but his interpretation is more along the lines of mine I.e the permitted maximum is simpky the member’s available AA in the tax year of allocation (less ER contributions already made).
Growth aspect is even less clear, basically down to provider discretion!

OK. I think the law is fairly clear that it is the actual relievable earnings.

172C(3) “The permitted maximum” is–

(a)the maximum amount of relief to which the member is entitled under section 188 (relief for contributions) in respect of relievable pension contributions paid during the tax year (see section 190), less

(b)the amount of any contributions paid by employers under any registered pension scheme in respect of the member in the tax year.

190 Annual limit for relief
(1) The maximum amount of relief to which an individual is entitled under section 188 (relief for contributions) for a tax year is (subject as follows) the amount of the individual's relevant UK earnings which are chargeable to income tax for the tax year.