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Pensions contributions due by ?

On a reasonably regular basis I am asked by clients to establish the amount of pension contribution they can make in order to maximise the tax benefit, which I have no problem in calculating.The next question is invariably,"When do I need to make that payment into my pension by?"
My answer is that technically the amount can be paid to the scheme administrator by 5th April 2001 if you wish it to be treated as having been made in the year 1999/2000, although if you wish the payment due on / by 31st January 2001 to be reduced you obviously need to make the payment before that date.
Am I correct? Or am I badly sadly wrong? I just cant seem to find this written down anywhere.
Any help would be very gratefully received.
Neil Brookes

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By admin
17th Aug 2000 14:13

Pension Contributions Under S.A.
You are correct in advising your clients' that a pension payment must be made by 5 April 2001 at the latest for it to be related back to the 1999/2000 tax year. The time limit for making the election to relate the contribution back to 1999/2000 being 31 January 2002.

To effect the payment due on 31 January 2001 the contribution must be made by this date and box 18.9 on the self-assessment return needs to be completed accordingly. If the pension payment is made after 31 January 2001 but prior to 5 April 2001 a stand alone claim will need to be made to the Inland Revenue.

I hope this is of help.

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17th Aug 2000 01:43

Stakeholder Pensions
Colin Bradley made the comment "roll on Stakeholder pensions".

It is my belief that comnpanies should minimse their exposure to Stakeholder pensions where ever possible - obviously this depends on pension scheme rules and population of employees as well as company philosophy.

The Government have recently annouced that occupational AVC's can be replaced by stakeholder pensions where the employee earns less than £30K. The benefit is that they are low cost AND eligible for a tax free lump sum.

I suppose many AVC contributors may find this mechanism rather useful.

Regards

Garth

PS What happens when a salary below the £30K threshold is breached due to annual increment etc? - I do not know but will find out at our next trustees meeting if anyone wishes to know.

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By admin
17th Aug 2000 00:58

Personal Pension Payments and Self Assessment
You are correct when you say that the payment must be made by 5 April 2001 for it to be able to be carried back to 1999/00.

The following points expand the issue a little......

The payment due 31 January 2001 relates to the balancing payment for 1999/00 and the first payment on account for 2000/01. If the 2000/01 pension payment is to be carried back to 1999/00 then a claim can be made at boxes 14.4, 14.9 or 14.19 (as appropriate) of the 1999/00 SA100, with the effective tax relief entered at box 18.9 and the credit given against the individual's Self Assessment account. Given that the deadline date for submitting the Return is 31 January 2001 this effectively ensures that credit will be given against the 31 Janaury 2001 payment (although reliance is placed upon the Revenue processing the Return quickly if it is submitted close to the deadline date). If no claim is made to carry-back the pension payment then it will be relieved in the 2000/01 tax year - this means that the Payments on Account can be reduced accordingly. Again, relief for the 31 January 2001 payment can be achieved in this way.

I don't think that actually making the payment before 31 Janaury 2001 is particularily important - what is essential is that the payment is made before 5 April 2001, and that the carry-back claim is made on the 2000 Tax Return or the 2000/01 Payments on Account are reduced (as the case may be) so as to gain the relief for the 31 January 2001 payment.

Clients must be aware, however, that if the 31 January 2001 payment is reduced in either of these ways on the assumption that a pension payment will be made by 5 April 2001, but it subsequently turns out that no pension payment is, in fact, made then they will be required to pay the extra tax, plus interest as appropriate.

I hope all this makes sense, and roll-on Stakeholder Pensions!!

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