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MARTIN RILEY looks at how employer contributions can be used in personal pension planning under the rules as revised for the stakeholder pension régime.
IT WAS WELL known that under the old personal pension rules the carry forward and carry back rules did not apply to employer contributions. Employer contributions could only be relieved in the current year and it was not possible to claim tax relief by bringing forward unused relief from previous years. Effectively it was current year contributions against current year income. However this does not seem to be the case with the new rules which took effect on 6 April 2001.
Benefit of employer contributions
An employer contribution is very tax efficient as there should be:
- no benefit in kind charge on the employee (section 643(1) Taxes Act 1988);
- no National Insurance charge (paragraph 2 of Part VI of Schedule 3 to Regulation 25 Social Security (Contributions) Regulations 2001).
Tax relief should...
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